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Copper prices rose on Tuesday as the dollar slipped, but the gains are likely to be capped by expectations of weak economic data from top consumer China this week.
A lower US currency makes dollar-denominated commodities cheaper for non-US firms, a relationship reinforced by funds that use computer models to make trading decisions.
Benchmark copper was trading at $5,985 a tonne at 0930 GMT, up from $5,948 at Monday’s close.
Demand for industrial metals
Clues on prospects for industrial metals demand will come from China’s data later this week on loans, investment and industrial production.
“The Chinese data over the next two days is likely to be relatively soft; there won’t be any massive surprises. Near-term trends will also depend on the dollar’s dynamics,’’ said Xiao Fu, head of commodity markets strategy at Bank of China International.
“Over the medium term we are cautious about prospects for the base metal complex, we’re not expecting prices to fall significantly, but there is some downside risk from current levels.’’
Fed rate hike
The dollar’s direction to a large extent will depend on whether the US Federal Reserve decides to delay raising interest rates.
Also helping to support copper is the idea that China will provide further stimulus measures to boost growth and demand if data continues to show economic deterioration.
“Additional measures are likely to be necessary because the sharp decline in producer prices in May points to weak domestic demand,’’ Commerzbank said in a note.
Signs of weak copper demand come from the discount of around $50 a tonne for cash metal over the three-month future.
Aluminium rose to $1,765 a tonne from Monday’s last bid at $1,750. Lead was up more than 1 per cent at $1,939 from Monday’s close at $1,910 and tin was lower at $15,405 from $15,440.
Zinc was up more than 1 per cent at $2,167 and nickel rose to $13,605 from $13,420.
The nickel market is waiting to see if workers at Sherritt International Corp's Ambatovy project decide to strike, which could widen an expected deficit for this year.
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