Volatile currency market affects rubber trading
Volatile currency market affects rubber trading
SINGAPORE (Reuter): The rubber trade faces an unsettled week against the background of Southeast Asia's volatile currency markets and the Thai government's default on a parcel of 23,100 tonnes, dealers said on Monday.
Falls in the Malaysian ringgit, Indonesian rupiah and Thai baht against the U.S. dollar should help buying interest and keep prices steady, but the unsettled state of the region's financial markets will cap any gains, they said.
"Players don't know what the valuation of the baht should be since it's very volatile, so they've become very cautious," a trader in Thailand, the world's biggest producer of natural rubber, said.
"As long as the region's currency situation is not resolved, the market will be nervous and business may suffer as a result. People are hoping the situation will calm down soon," a dealer for a rubber trading house in Singapore added.
Indonesian dealers said expectations of further steady gains in Tokyo futures following the expiry of the spot contract there last week should help sentiment somewhat.
"Prices edged up in Indonesia on Friday because of extended gains in Tokyo, and with expectations of further gains in Tokyo this week, it will be helpful to us," one said.
"The prices were up mostly because of higher Tokyo prices following the expiry of spot July," a Thai dealer added.
But Indonesian dealers said the default by the Thai government on taking delivery of rubber it had bought from local farmers, as part of a plan to prop up local prices, could limit any price advances.
"Any upside potential will be limited by the bearish factors from the Thai market," a dealer said. "They will have ample rubber to sell after the government defaulted on purchases."
The default would boost supplies in the market, and Indonesian prices could suffer as they are at a premium to values in Thailand and Malaysia, he said.
Tire-grade September shipment SIR20 offer prices were quoted at 43.50-44.00 U.S. cents/lb FOB Medan from 44.00-44.50 cents last week.
The grade was quoted at 43.50 cents FOB Palembang and Padang from 44.00 cents, 43.75 cents FOB Surabaya from 44.00 cents and 43.25 cents FOB Jambi and Pontianak against 44.75.
In Thailand, the overall market remained thin last week with China and Japan the only major buyers around.
"The Chinese bought around 20,000 tonnes so far this month. Not too bad," said a Bangkok-based dealer.
The Thai benchmark RSS3 for September delivery was offered at 95.00 U.S. cents a kg FOB Bangkok and December at 99.00 cents on the same basis.
Malaysian rubber prices were also expected to move up this week if the ringgit remains soft against the U.S. dollar, traders said.
"Sellers appear firm about holding to current levels, given the fluctuations in the currency," said a trader. "So, I don't think there's going to be much of correction."
Malaysian rubber is traded in ringgit and sellers find a weak ringgit a disadvantage, the dealers said. Weak consumer demand and the hunt for lower prices has also kept buyers sidelined.
The Malaysian Rubber Exchange and Licensing Board quoted the benchmark RSS1 buyer for August at 245.50 Malaysian cents a kg at the close of the market last week, up 9.50 cents from the previous week.
It quoted the popular SMR20 for August buyers at 244.50 cents a kg, 7.50 cents higher than the previous week.
Traders quoted the SMR 20 at 243 cents, SMR CV at 295, SMR L at 275 cents, SMR5 at 253, SMR10 at 244 cents and drum latex at 191 cents.