Weak dollar pushes up copper price - Emirates24|7

Weak dollar pushes up copper price


Copper rose on speculation a weaker dollar will spur demand for raw materials as a hedge against inflation. The metal has climbed 30 per cent this year, approaching a record, while the dollar fell 6.3 per cent against a weighted basket of six major currencies.
The US Dollar Index fell as much as 0.6 per cent yesterday on speculation Group of Seven finance chiefs meeting in Washington are unlikely to agree on a plan to support the currency.


“The metals are extremely sensitive to the movements in the dollar,” said Michael Gross, a futures analyst at OptionSellers.com in Tampa, Florida, US.


Copper futures for May delivery gained 2.05 cents, or 0.5 per cent, to $3.9445 (Dh14.4861) a pound on the Comex division of the New York Mercantile Exchange. The price fell 0.3 per cent this week, partly on concern the surge near the record would erode demand for the metal used in wires and pipes.


The dollar, which fell to a record of $1.5913 versus the euro, has increased demand from investors seeking a store of value, Gross said. A “tidal wave” of $70 billion has poured into commodity markets this year from hedge funds and other investors, Citigroup said in a report.


“There’s a lot of speculative money out there that’s looking for a home, and it’s just been pouring into copper,” Ron Goodis, a futures trading director at Equidex Brokerage Group Inc in Closter, New Jersey, said on April 7. “This market just doesn’t look like it wants to stop.”


The metal reached $4.039 yesterday on concern supplies will trail demand. The highest price ever for the most-active contract was $4.04 in May 2006.


Producers including Rio Tinto Group and Freeport-McMoRan Copper & Gold Inc have said mines have been unable to keep up with rising demand, especially from China. Supplies may fall short of consumption this year, Bret Clayton, chief executive officer of Rio Tinto’s copper unit, said on April 9.


“Strong demand from China has been supporting the copper price over the last several months, and there’s the expectation that demand will continue to be strong through the rest of the year” Gross said.


China’s imports of copper and copper products in March rose to 240,634 metric tons from 226,908 tons in February, the Beijing-based customs office said today, citing preliminary data. A year earlier, China imported 307,723 tonne.


“Global demand, even with the slowdown in the US, remains strong, and there are challenges to the industry to provide supplies,” Richard Adkerson, chief executive officer at Freeport, said this week. The company is the world’s biggest publicly traded copper producer.


Copper has gained more than fivefold since 2001 as consumption surged in China, the world’s largest metals buyer. Citigroup estimates the country now accounts for 24 per cent of world usage. Demand will outpace production by 100,000 metric tons this year, UBS AG said on March 27.


On the London Metal Exchange, copper for delivery in three months rose $20, or 0.2 per cent, to $8,650 a metric ton. (Reuters)