Rubber Declines to Four-Week Low on Chinese Demand Concern

Rubber Declines to Four-Week Low on Chinese Demand Concern
Jan. 27 (Bloomberg) -- Rubber declined to the lowest level in four weeks on concern demand for the commodity may weaken as China, the largest user, stepped up measures to slow economic growth. A stronger yen also curbed demand for the material.
Futures in Tokyo fell as much as 3.4 percent to 276.5 yen per kilogram ($3,098 a metric ton), matching the price reached on Dec. 30. Prices lost 6.1 percent in the previous three days, paring this month’s gain to 2.4 percent.
Chinese banks have begun restricting new loans, responding to a push by regulators to contain credit and curb the expansion of the world’s fastest-growing major economy. Concerns over slower growth increased after the International Monetary Fund said yesterday the global financial system remains “fragile,” with sovereign debt posing a risk to markets.
Bank of China Ltd. and China Construction Bank Corp. were told to restrict new loans, according to people familiar with the matter. Gross domestic product in China, the world’s third- biggest economy, expanded at the fastest pace since 2007 last quarter. Slowdown in the nation’s growth may curb vehicle sales, said Kazuhiko Saito, an analyst at Fujitomi Co. in Tokyo.
“The market may retreat further as concern about China’s monetary tightening reduced the risk appetite of investors,” he said by phone today.
July-delivery rubber declined 2.8 percent from its settlement yesterday to end at 278.20 yen per kilogram on the Tokyo Commodity Exchange. Prices more than doubled last year.
May-delivery rubber on the Shanghai Futures Exchange lost as much as 3.3 percent to 23,655 yuan ($3,465) a ton, the lowest level since Dec. 30, before settling at 23,955 yuan.
Stronger Yen
Futures in Tokyo also declined after the Japanese currency touched 89.14, the strongest in five weeks against the dollar. The yen rose 0.3 percent to 89.30 against the dollar at 3:38 p.m. in Singapore.
“The Japanese yen was sharply stronger amid worries over the health of U.S. economy,” Rewat Yenchai, an analyst at AGROW Enterprise Ltd., said by phone from Bangkok today. “That cut appeal for yen-dominated contracts.”
The yen gained on concern the global economic recovery will slow, increasing demand for Japan’s currency as a refuge. The dollar also came under pressure amid speculation the Federal Reserve will keep interest rates near zero before a report forecast to show U.S. business activity slowed this month.
The yen typically strengthens in times of financial turmoil as Japan’s trade surplus makes the currency attractive as it means the nation does not have to rely on overseas lenders.
“Risk aversion is strong globally, making it easy for the yen to be bought,” said Masahide Tanaka, a Tokyo-based senior strategist at Mizuho Trust & Banking Co.