"There has been very little physical trade recently. People are only checking prices," said one Singapore trader. "They may even stop asking if Japan's economic outlook remains so bearish. There is no good news at all and most people are very pessimistic," the trader said. The dollar rose above 144 yen in early Tokyo trade on Monday amid political uncertainty in Japan after the ruling Liberal Democratic Party suffered a major setback in Upper House elections. Hopes that the International Natural Rubber Organisation (INRO) would buy up the market have faded with rubber prices posting minor gains last week as regional currencies weakened against the dollar, traders said.

"It's currency movements, not demand, that supported rubber prices," another Singapore trader said. INRO groups major rubberproducers and consumers. Under INRO rules, the buffer stock manager may buy rubber when the group's five-day moving average price falls to 183 Malaysian/Singapore cents a kg. He must buy at 172. The average price was 190.54 cents on July 9, compared with just above 183 in late June.

"It doesn't look like we will see the may-buy level soon," said the second trader. In Thailand, prices ended a week slightly higher after the Thai baht eased against the dollar. China agreed to buy 5,000 tonnes of rubber from the Thai government stockpile of around 50,000 tonnes at $632 per tonne, and traders saw some moderate demand.

However, news that Japan's May rubber output for tyres dropped by 2.4 percent year-on-year weighed on sentiment.

The Japan Automobile Tyre Manufacturers' Association said on Friday that the country's rubber output for tyres totalled 84,427 tonnes in May, representing a 2.4-per cent drop.

In the first five months of this year, rubber output for tyres totalled 444,860 tonnes, down 1.2 per centfrom the corresponding period a year ago.In light of weak domestic demand, Japanese trading firms continued to cut rubber imports.

"News from rubber output for tyres and the bearish outlook of local and regional automobile industry do not bode well for market sentiment here," said a Hat Yai trader. Thai RSS3 for October shipments was quoted at 73 US cents per kg on FOB basis at the end of last week. November and December were quoted at 74 and 75 cents a kg respectively. A weaker Malaysian ringgit also supported rubber levels, but demand from overseas consumers remained poor, partly because of cheaper rubber offered in Indonesia, traders said. "The market has been driven by currency as there were no other factors. I expect this to continue," said a local trader.

At the end of last week, the ringgit sank to a five-month low of 4.2750 to the dollar against around 4.1400 a week earlier.

On Friday, the Malaysian Rubber Board quoted August RSS1 buyer at 289.50 Malaysian cents (68 US cents) a kg, up 5.50cents for the week. August SMR 20 buyer was one cent higher at 257 cents a kg. Prices of tyre-grade SIR20 in Indonesia are expected to stay stable this week, with demand remained thin despite lower levels there than in other rubber-producing countries. "We expect the market to be stable because the rupiah is relatively steady at around 15,000 against the US dollar. Buyers are also sniffing for prices," said one Jakarta-based trader.