Tokyo rubber futures rose briskly to mark a fresh 12-week high on Wednesday on technical buying, with the market anticipating further gains after the benchmark contract closed above the key 135-yen level. The benchmark July TOCOM rubber contract on the Tokyo Commodity Exchange closed up 4.3 yen per kg at 137.3 yen, the session high, which was the highest level for a benchmark contract since it, hit 137.6 yen on November 11.

On Wednesday's trough was 132.8 yen. Other contracts closed up 2.7-3.4 yen. "Fund operators who have been holding substantial shorts are now moving to cover their positions," a Tokyo analyst said.

In the past, some fund operators have very rapidly shifted their positions and this could happen again, he said.

He added that the market would likely next test 140 yen, which it might easily top in the current firm market.

"Now that we've left the 135-yen level behind, it's psychologically looking good for long holders," he said. In the region, rubber prices in Thailand, the world's largest producer and exporter of natural rubber, are expected to rise over the next week, supported by tight domestic supplies and strong overseas demand.

Supplies have been tight with the start of the wintering season, when temperatures soar and latex output declines on average by 30 percent.

Copyright Reuters, 2005