Southeast Asian rubber trade affected by currencies

Southeast Asian rubber trade affected by currencies

SINGAPORE (Reuter): The Southeast Asian rubber market will
take its cue from the region's wobbly financial markets this
week, especially after regional currencies fell to fresh record
lows, traders said yesterday.

But buying is seen remaining weak since most of the major
consumers have locked in their coverage and will not have to
enter the market over the next few weeks, they said.

"People are still talking about the haze, drought and other
related things. But currency is the main issue," a dealer in
Indonesia said.

"The regional trade will be dominated by the state of the
currency market," said a dealer in Singapore.

Indonesian dealers said prices of the benchmark SIR20 rubber
should be stable with the trade focused on the next move of the
rupiah.

"The rupiah movement will be the issue for this week." a
trader said. "The fall in the rupiah has made export prices
become more and more competitive. Demand is still slow in
general, but there is always a chance prices will rise again
because (local) supply is tight."

Traders said SIR20 finished the week at 41.00 U.S. cents a kg
FOB Palembang and Medan for November shipment, 40.75 cents FOB
Padang, 40.50 cents FOB Jambi and 40.25 cents FOB Pontianak.

In Malaysia, all eyes are on the ringgit, especially after it
fell to record low of 3.4080 to the dollar last Wednesday,
sparking a sharp rise in rubber prices.

"Everything is going on the currency now," a rubber trader in
Kuala Lumpur said. "Some are saying it's going to reach 3.50."

The Malaysian Rubber Exchange and Licensing Board quoted the
November RSS1 buyer at 290.50 Malaysian cents a kg at the close
of trade last Friday. November SMR20 buyer was seen at 288.50
cents. Both rubber grades rose by 21 cents through last week.

Traders said although Malaysian prices were inflated, they
were still competitive in the region.

"On the average, we are still cheaper than Indonesia, so I
reckon we are still not too far spaced out," said a trader.

Concerns over the jittery financial markets and the impact of
smog shrouding most of the region appear to have eased in
Thailand as players turned their attention to the level of stocks
in Japan, dealers said.

"The baht seemed to withstand the regional pressure quite well
this week. Its fall was rather limited and it moved in a narrow
range. It might be in the process of stabilizing," said a trader
in the rubber center of Hat Yai.

Thai RSS3 was quoted at 95.00-96.00 U.S. cents a kg FOB
Bangkok for January/February shipment and 90.00 cents on the same
basis for November shipment.

Traders in Jakarta and Bangkok said supplies may increase as
more rains fall in drought-stricken Sumatra island while rubber
tappers in Thailand returned to work after a local holiday.

Malaysian dealers said the supply of latex and other materials
likewise remained ample with no immediate impact seen from the
drought spawned by the El Nino weather anomaly or the smog from
forest fires in neighboring Indonesia.

Singapore-based dealers said increased supplies may be bad
news for the market.

"Most of the consumers have already bought some coverage. I'd
be cautious in this market," one said.

"Offtake has been pretty weak," another trader said.