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.