TOKYO, Oct 1 (Reuters) - Key Tokyo rubber futures slid for a third straight session on Tuesday as the start of a U.S. government shutdown dented market sentiment and fuelled demand worries for the soft commodity.
Tokyo Commodity Exchange (TOCOM) futures, which set the tone for tyre rubber prices in Southeast Asia, also got hit as the yen strengthened throughout trading hours.
The benchmark TOCOM rubber contract for March delivery dropped 1.8 percent to settle at 260.9 yen per kg, after trading as low as 260.6 yen, the lowest since Aug. 22.
"Like other financial products the U.S. government shutdown has hurt market sentiment for rubber over the last few days," said a Bangkok-based trader.
If the contract falls below 260 yen, some traders would look at buying on dips, said the trader, adding trading action looked to be limited with Chinese market players away for holidays.
The U.S. government began a partial shutdown on Tuesday for the first time in 17 years, potentially putting up to one million workers on unpaid leave, closing national parks and stalling medical research projects.
The benchmark Nikkei 225 pared much of its early gains to close 0.2 percent higher, weighed down by worries about the consequences of government closure in the world's biggest economy.
The index advanced as much as 1.3 percent after Japanese manufacturers' sentiment rose sharply in the three months to September to a near six-year high, a closely-watched central bank survey showed.
The U.S. dollar was quoted around 97.91 yen in afternoon Asian trade, below its session high of 98.73 yen touched in the morning.
A stronger yen makes dollar-based rubber cheaper and normally encourages players to sell contracts to cut losses.
Adding some support to the contract, crude rubber inventories at Japanese ports stood at 4,708 tonnes as of Sept. 20, ticking up from a three-year low in the previous release, industry data showed earlier in the day.
The Shanghai rubber market was shut on Tuesday for the National Day holiday.
The front-month rubber contract on Singapore's SICOM exchange for November delivery last traded at 230.20 U.S. cents per kg, or 2.80 cents lower. (Reporting by James Topham; Editing by Subhranshu Sahu)