Rubber price falls to seven-week low

Dollar's rally, demand concern are key factors

by Tom Stundza -- Purchasing, 7/23/2008 10:57:00 AM

Natural rubber futures in Tokyo fell to $3/kilogram today, the lowest in almost seven weeks and 50¢ below the daily price being reported by the Malaysian Rubber Board. News reports from Asia say the recent increase in the value of the dollar has reduced the appeal of commodities as an alternative investment. And there is growing concern that slowing world car sales will curb demand for the material used to make tires.

The dollar has rallied to the strongest since July 10 after Treasury Secretary Henry Paulson supported legislation to boost confidence in Fannie Mae and Freddie Mac, the largest sources of U.S. mortgage financing.  “A sharp bounce in the dollar prompted investors to cut holdings of commodities, including rubber,” analyst Jun Nishimuta at Kanetsu Asset Managementtells the Bloomberg news service.

Atop that, Nissan Motor Co., Japan's third-largest automaker, is considering production cuts of some truck models built at plants in Tennessee and Mississippi. Automakers have been hurt this year by a drop in demand for less fuel-efficient models amid record gasoline prices and a sluggish economy. Honda Motor will trim production of Pilot SUVs and Odyssey minivans by at least 10,000 units, and Toyota Motor Corp., Asia's largest carmaker, is halting temporarily production of Tundra pickups and Sequoia large SUVs.