By Aya Takada Jan. 22 (Bloomberg) -- Rubber slumped by the most in four months on concern that investor demand for the commodity 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 since Sept. 14. President Barack Obama, tapping into voter anger over bank bailouts, 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 3 percent and erased this year’s advance. “Investors were cutting holdings of risk assets because of the proposed restrictions on U.S. financial institutions,” said Kazuhiko Saito, an analyst at commodity broker Fujitomi Co. in Tokyo. “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 ($3,172 a metric ton) and traded at 287.0 yen on the Tokyo Commodity Exchange at 1:19 p.m. Prices are headed for the biggest weekly loss since the week ended Dec. 11. The yen climbed on concerns that 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. 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 for May delivery on the Shanghai Futures Exchange lost 3.8 percent to 24,395 yuan ($3,573) a ton at 12:30 p.m. local time. To contact the reporter on this story: Aya Takada in Tokyo at atakada2@bloomberg.net

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