Monday, 23 March 2015 14:22
MELBOURNE: London copper rose to its highest level in more than two months on Monday, as expectations the United States will delay an interest rate hike dragged on the dollar, while chart watchers saw fresh buy signals after prices broke a key technical level.
The dollar traded on the defensive in Asia in the wake of the Federal Reserve’s dovish steer, which cast doubts on bullish positions in the greenback.
A weaker dollar boosts purchasing power of commodity buyers paying with other currencies, while expectations of cheaper capital for longer were also supporting the sector.
“The dollar has come off a little bit, so that has helped – we still think rates are going to rise, but obviously there is a more pronounced debate over the timing,” said analyst Dan Morgan at UBS in Sydney.
“Now is the time when seasonally there should be a bit more activity in China … but the price at these levels are probably creating a bit of a headwind for consumers (in the short term),” he said. China activity is seasonally strongest after Lunar New Year in the second quarter, before the northern hemisphere summer.
Three-month copper on the London Metal Exchange traded up 0.5 percent at $ 6,072 a tonne by 0741 GMT, stretching 3.3-percent gains from the previous session. Prices earlier struck $ 6,141.50, their highest since Jan. 9.
The most-traded May copper contract on the Shanghai Futures Exchange surged to 44,050 yuan ($ 7,101) a tonne, also its highest since early Jan, before ending up 3.7 percent at 43,690 yuan.
Both metals cracked the 100-day moving average for the first time since September, a chart signal that sparked stop-loss buys and may also encourage fresh long positions.
Traders said China-based funds have been covering their short positions. “I think the rally won’t last long. Traders will short when prices are above $ 6,000,” a Hong Kong broker said.
China’s economy faces increased downward pressure this year but the slowdown is stabilising, with employment and services among the bright spots, its Vice Premier said on Sunday.
Hedge funds and money managers increased their net long position in copper to the highest in over six months, the latest data showed.
Meanwhile, a five-day blockade by workers at Freeport-McMoRan Inc’s Indonesian mine ended on Saturday and normal operations were being resumed.
The country also said it was looking at easing its mineral export ban for bauxite producers to help promote the building of smelters, while top tin miner PT Timah and a group of tin smelters have agreed to cap total monthly exports at 4,500 tonnes.
Copyright Reuters, 2015
