Jan. 22 (Bloomberg) — Rubber slumped by the most in four months on concern that investor demand will weaken after a U.S. proposal to restrict risk-trading spurred a rally in the yen and a sell-off in global stocks.

Futures in Tokyo tumbled as much as 5.8 percent, the most in intraday trading since Sept. 14. President Barack Obama called for limits on the trading activities of banks as a way to prevent another financial crisis. The yen rose to a one-month high against the dollar and Japan’s Nikkei 225 Stock Average lost 2.6 percent, erasing most of this year’s advance.

“Investors were cutting holdings of risk assets because of the proposed restrictions on U.S. financial institutions,” Kazuhiko Saito, an analyst at Tokyo-based broker Fujitomi Co., said today by phone. “Rubber was dragged down by losses in the equities and metals markets.”

Rubber for June delivery lost as much as 17.5 yen to 285.1 yen per kilogram ($3,158 a metric ton) before settling at 289.3 yen on the Tokyo Commodity Exchange. It fell 3.0 percent this week, the worst performance since the week ended Dec. 11. Prices have still gained 4.8 percent this month.

The yen climbed on concerns a U.S. proposal to limit risk- trading at banks will discourage demand for higher-yielding assets. A stronger Japanese currency cuts the appeal of yen- based futures as rubber trades globally in dollars.

Trading Curbs

Obama’s proposals, to be added to an overhaul of laws being considered by Congress, would prohibit banks from running proprietary trading operations solely for their own profit and sponsoring hedge funds and private equity funds.

“Trading restrictions at banks will enhance risk- aversion,” said Soichiro Mori, a Tokyo-based strategist at FXOnline Japan Co.

Rubber futures also declined amid speculation that China may change its fiscal and monetary policy after the nation’s economic growth accelerated, Saito at Fujitomi said.

China’s 10.7 percent growth in the fourth quarter ignited concern that the nations responsible for leading the world out of a recession will raise borrowing costs to keep their economies from overheating. China is the world’s largest user of natural rubber as the nation surpassed the U.S. to become the biggest auto market last year.

China’s statistics bureau omitted a reference to maintaining a “moderately loose monetary policy” and a “proactive fiscal policy” in its outlook section when it announced the fourth-quarter growth yesterday. The statement mirrored the same omission by Premier Wen Jiabao in a Jan. 19 report. Rubber for May delivery on the Shanghai Futures Exchange lost 3.2 percent to 24,550 yuan ($3,596) a ton at 2:49 p.m. local time.

Source: Bloomberg

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