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REUTERS
Tokyo: Japanese rubber futures are expected to firm next week with sentiment supported by a weaker yen, but upward momentum will be limited on prospects that a world surplus of rubber will continue, analysts said on Friday."While many players had expected the July contract would fall to a record low this week, the contract faced strong support at 77 yen," said an analyst.Stronger than expected support and the dollar's bounce against the yen raised a feeling that rubber futures may have bottomed out and, as a result, sellers became concerned about further selling and the market saw buying at the lows, he said.
Rubber futures prices on the Tokyo Commodity Exchange (Tocom) were generally higher on Friday as the dollar climbed and stayed above 120 yen by midday, reflecting the belief that Japanese authorities were endorsing a weaker yen.Spot February closed up 1.6 yen from Thursday at 69.6, after hitting a record low of 65.0 yen for a spot contract on Monday.
Benchmark July was 81.0 yen at the close againstThursday's 80.6 yen. The contract recovered from 77 yen on Monday, just above a record low of 76.9 yen for a benchmark contract marked on September 28, 1993.Analysts said market players had their eyes on the February contract's expiry session on Monday, adding that there could be a lack of participants willing to take deliveries.
"The situation is not good...There were more than 500 lots of selling contracts for spot February by midday (on Friday), but buying at the expiry session is estimated below 200 lots," said another analyst.
The first analyst said: "I don't expect February contracts to fall below the current record of 65 yen at the expiry session, although prices will be easier."
After the expiry session, trading of new August contracts will begin on Tuesday andthe price will likely start at above 80 yen, possibly slipping to 77 yen or so next week, he added.
Players will focus on the outcome of Saturday's meeting in Bonn of Group of Seven finance ministers and central bankers as a clue fornext week's rubber future prices.
G7 acceptance of a weaker yen would help Tokyo rubber futures following market disappointment at Thailand's recent announcement that it would leave the International Natural Rubber Organisation (INRO), analysts said.
On Friday, the dollar received support from a report by Kyodo news agency early in the morning which quoted an international financial source as saying that financial leaders of the G-7 would likely endorse the recent weakening of the yen against the dollar to bolster Japan's economic recovery.Japan's economic planning agency minister Taichi Sakaiya told reporters on Friday that the dollar at around 120 yen was at an appropriate level in light of the foreign exchange basisused in forming the government's economic outlook.
On the Osaka Mercantile Exchange, benchmark July closed 81.4 yen on Friday, up 0.6 yen from Thursday.
Open interest in Tocom rubber futures, a barometer of the contract's popularity among investors, was 251,283 at the end of Thursdaytrade, up from 240,619 at the end of Wednesday last week. Japanese rubber futures markets were closed last Thursday for a National holiday.
Thai rubber was offered to Japan at 67 US cents per kg on an FOB basis on Friday, down from 68 US cents about a week ago.
In the local physical market, Thai rubber for large-lot end users was quoted at 78 yen per kg on Thursday, down from 80 yen about a week ago.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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