Rubber Drops Third Day as Falling Oil, Yen's Rally Cut Appeal

By Aya Takada

Nov. 13 (Bloomberg) -- Natural rubber in Tokyo fell for a third day to the lowest in almost a week after oil prices tumbled to a 21-month low and Japan's currency jumped against the dollar, cutting the appeal of yen-denominated contracts.

Futures in Tokyo lost as much as 6.8 percent to the lowest since Nov. 7 as oil plunged on speculation the International Energy Agency will cut its global demand estimate today and the U.S. will report that stockpiles gained. Lower oil is negative for prices of natural rubber as its synthetic alternative is made from naphtha, distilled from petroleum.

``Rubber futures were hit by the double blows of falling commodities and a rising yen,'' Kazuhiko Saito, strategist at Interes Capital Management Co. in Tokyo, said today by phone.

Rubber for April delivery dropped 4.7 percent to 172.8 yen a kilogram ($1,806 a metric ton) on the Tokyo Commodity Exchange at the 11 a.m. local time break. Prices reached a 28-year high of 356.9 yen June 30 as record-high oil spurred investor demand for commodities as an inflation hedge.

Crude oil for December delivery in New York fell to $55.03 a barrel, the lowest since Jan. 30, 2007. U.S. gasoline purchases dropped 4.2 percent last week, the 29th consecutive week of decline, MasterCard Inc. reported yesterday.

``Concern about demand will cap prices of industrial commodities until the economies show signs of recovery,'' Saito said. ``We may see more losses in oil and rubber.''

Futures also declined after Japan's currency surged to a two-week high against the dollar, reducing the appeal of yen- denominated contracts for the commodity traded globally in dollars. The yen will strengthen 6 percent against the U.S. dollar because of the unwinding of bets on higher-yielding assets, Goldman Sachs Group Inc. said.

March-delivery rubber on the Shanghai Futures Exchange, the most-active contract, lost 2.9 percent to 12,895 yuan ($1,888) a ton at 11:18 a.m. local time.

To contact the reporters on this story: Aya Takada in Tokyo atakada2@bloomberg.net;