Tokyo rubber futures drifted lower in thin trade on Friday, with operators reluctant to take fresh positions on uncertainty about direction after a technical rally ran out of steam, brokers said. The benchmark July rubber contract on the Tokyo Commodity Exchange finished down 0.7 yen per kg at 138.3, after trading narrowly between 138.1 and 139.9. Other months were 0.3 to 1.1 yen lower.

"People are wondering if the market will be corrected down further or come back to an upward track," one broker said.

The market was consolidating after a period of high volatility in the past month, with the benchmark contract jumping to a four-month high of 146.9 yen on February 14 from a two-month low of 118.3 yen on January 13.

The broker said the benchmark contract would regain upward momentum and test the October high of 147.9 after building a base around 135-137 yen. If the contract fails to sustain the level, it might slip towards 130 yen.

Operators were also wary of trading actively before the spot contract expiry next on Tuesday, which could set a direction. The February contract is expected to expire at a low price, as the current price level is seen as too high to stimulate interest in taking physical deliveries, another broker said.

Last month, the spot January contract expired at 124.9 yen per kg with 156 lots or 1,560 tonnes of deliveries. Turnover of TOCOM rubber were 15,443 lots on Friday, down from Thursday's 17,260 lots.

Open interest was 54,968 lots at the end of Thursday trade, up from Wednesday's 54,418 lots. The dollar was at 105.45/48 yen, little changed from late US levels.

Copyright Reuters, 2005