Rubber Tumbles to Six-Week Low as Dollar Rally Weakens Demand

Feb. 5 (Bloomberg) -- Rubber plunged to a six-week low after crude oil slumped and on concern that the dollar rally will reduce the appetite for commodities as alternative assets.

Futures in Tokyo tumbled as much as 5.6 percent, extending yesterday’s 0.7 percent loss. Crude oil traded near $73 a barrel after having biggest drop in six months yesterday as an increase in U.S. jobless claims raised concern fuel consumption may be slow to recover. Lower crude price increases the competitiveness of rival synthetic rubber used in tires.

“The strengthening dollar is prompting investors to unwind their positions in commodities,” Rewat Yenchai, an analyst at AGROW Enterprise Ltd., said by phone from Bangkok.

Rubber for July delivery on the Tokyo Commodity Exchange lost as much as 15.7 yen to 267.2 yen per kilogram ($2,980 a metric ton), the lowest price since Dec. 22, before settling at 268 yen.

The dollar rose to its highest level in more than eight months against the euro amid concern widening deficits will hamper Europe’s economic recovery. Rising job losses in the U.S. and financial problems in Europe also fueled investor concern that the global economic recovery is slowing.

Spillover

Declines in equity and other commodity markets spilled over to rubber, Roka Komiya, rubber trader at trading company Marubeni Corp., said by phone from Tokyo.

“Funds are flowing away from the commodity markets,” Komiya said. “If that stops, it will stop the decline of the rubber.”

The MSCI Asia Pacific Index dropped 2.5 percent to 114.69 as of 4:46 p.m. in Tokyo. The gauge has fallen 9.6 percent from a 17-month high on Jan. 15 amid concern central banks from China to India will tighten monetary policy to curb inflation.

“Some investors are worried over the recall of Toyota cars,” Takaki Shigemoto, an analyst at research and investment company JSC Corp., said by phone from Tokyo.

Toyota Motor Corp. said yesterday for the first time it may recall the latest version of the Prius, the world’s best-selling hybrid car, in Japan after the Japanese government ordered an investigation of its braking system.

Almost 8 million Toyota vehicles have already been recalled worldwide for defects that can cause sudden acceleration.

May-delivery rubber on the Shanghai Futures Exchange lost as much as 4.8 percent to 22,000 yuan ($3,222) a ton, the lowest level since Dec. 16, before settling at 22,190 yuan.

--Editors: Richard Dobson, Jake Lloyd-Smith.