Copper climbs as bets on delayed Fed hike dent dollar

Reuters Melbourne | Updated on January 24, 2018

London copper climbed on Thursday as market expectations shifted towards a December US rate hike, which dented the dollar, and suggested that the industry may have longer to access cheaper capital.

The US economy is growing moderately after a winter swoon and likely strong enough to support an interest rate increase by the end of the year, but concerns remain over the recovery of the labour market, Federal Reserve officials said.

Dollar vs other currencies

The dollar fell to its weakest in a month against an index of currencies, boosting the allure of metals for buyers holding other currencies.

Still, the Fed’s caution and a potential Greek eurozone exit underscored global economic risks to copper demand, at a time when its fundamental picture is also showing signs of stress, said Jonathan Barratt, Chief Investment Officer at Sydney’s Ayers Alliance.

Summer season slowdown

Copper was partly under pressure due to the seasonal summer slowdown, he said.

“But there’s more — it’s still a buyer’s market and there’s also a lot of questions about what’'s happening in steel and iron ore,’’ he added.

Steel and iron ore are typically used earlier in the construction cycle than copper and are sometimes seen as forerunners to copper demand.

Three-month copper on the London Metal Exchange rose 0.6 per cent to $5,776.50 a tonne by 0817 GMT, having closed a tad softer in the previous session when it plumbed a new 3-month trough at $5,728 a tonne.

Barratt sees strong support for copper around $5,600.

The most-traded copper contract on the Shanghai Futures Exchange traded up 0.5 per cent at 42,080 yuan ($6,779) a tonne.

Beijing stimulus measures

Beijing continued to roll out measures to support its economy, brightening the outlook for metals medium term.

China will step up “effective investment’’ in key sectors, including shantytown renovation and rural power infrastructure, to support growth, the cabinet said, even as it saw more positive factors in the economy.

There were some signs that measures so far are having an effect.

New home prices in China rebounded nationwide for the first time in 13 months in May, suggesting a property downturn is bottoming out after a barrage of stimulus from the central bank and local governments since late last year.

This helped drag LME zinc, nickel and lead up between roughly half and 1 per cent. LME aluminium also climbed away from this week’s 16-month lows.

The “blind insistence’’ on cutting Greek pensions will only worsen the country’s already dire financial crisis, Greek Prime Minister Alexis Tsipras wrote in a German newspaper commentary on Thursday.

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Published on June 18, 2015
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