Rubber Nears 18-Month High on Weak Yen, Economic Recovery

April 1 (Bloomberg) -- Rubber advanced for the first time in three days as a drop in the Japanese currency raised the appeal of yen-based contracts, and data from Japan and China boosted investor confidence in economic recovery.

Futures in Tokyo gained as much as 1.7 percent, nearing an 18-month high of 314 yen per kilogram ($3,363 a metric ton) reached on March 30. The price extended a 12 percent rally in the three months ended yesterday, the fifth quarterly gain.

The yen declined to a two-month low against the dollar as signs Asian economies are picking up damped demand for the Japanese currency as a refuge. Confidence among Japan’s largest manufacturers rose for a fourth straight quarter as a rebound in the global economy drove demand for exports.

“A weak yen gave the largest support to rubber futures,” Takaki Shigemoto, an analyst at research and investment company JSC Corp. in Tokyo, said today by phone.

Rubber for September delivery gained as much as 5.2 yen to 313.5 yen before trading at 311.7 yen on the Tokyo Commodity Exchange at 11:04 a.m. local time.

Investor appetite for risk assets increased as data showed today that confidence improved among Japan’s industrial companies, Shigemoto said.

The Tankan index of sentiment climbed to minus 14 in March from minus 25 in December, the highest level since September 2008, the Bank of Japan said today. The reading matched the median forecast of 23 economists in a Bloomberg News survey.

China Manufacturing

Manufacturing in China, the world’s largest rubber consumer, expanded at a faster pace in March, reinforcing an economic rebound in the wake of a record expansion of credit that now risks bubbles in the country’s asset markets.

The Purchasing Managers’ Index rose to a seasonally adjusted 55.1 from 52 in February, according to Li & Fung Group, a Hong Kong-based company that releases data for the Federation of Logistics and Purchasing. The figure was in line with the median estimate in a Bloomberg News survey of 13 economists. Readings above 50 indicate expansion.

Futures also gained as supply in Thailand, the world’s largest producer of natural rubber, declined seasonally, Shigemoto said. The nation is in the low-output season, known as wintering, which runs from February through April. During this season, trees shed their leaves and latex output slows.

Thai shippers offered so-called RSS-3 grade rubber for May shipment at $3.49 a kilogram today, compared with $3.50 on March 30, he said.

Rubber for September delivery lost 0.4 percent to 24,650 yuan ($3,611) a ton on the Shanghai Futures Exchange at 10:11 a.m. local time. The price retreated after reaching the highest level in almost a month on March 29.