BLBG; Copper Rises After Federal Reserve Cuts Rate to as Low as Zero
By Li Xiaowei
Dec. 17 (Bloomberg) -- Copper rose from near the lowest in more than three years in London after the Federal Reserve cut interest rates to as low as zero and signaled it will continue to buy assets to bolster the world’s largest economy.
The rate cut made the greenback the lowest-yielding currency among industrialized nations, making it more attractive for investors to buy other assets. The dollar traded near the lowest level in more than two months versus the euro.
The “dollar’s decline suggests a rebound in investors’ sentiment” for riskier assets, analysts led by Tan Wentao at HNA Topwin Futures Co. said in an e-mailed report today. “Some commodities may rebound in the near term despite weak fundamentals for the sector as a whole.”
Copper for three-month delivery rose as much as 1.8 percent to $3,125 a ton on the London exchange and traded at $3,100 at 9:28 a.m. in Shanghai. It fell to as low as $2,991 on Dec. 5, the first time it dipped below $3,000 since May, 2005.
The Federal Reserve yesterday said it will target a federal funds rate of between zero and 0.25 percent as it seeks to end the longest slump in a quarter-century.
The copper price is down by 54 percent this year, heading for the first annual drop since 2001, on concerns a global recession will reduce demand for raw materials. Investors also sold commodities to raise cash amid a credit crunch.
The dollar traded at $1.4053 to the euro as of 9:33 a.m. in Shanghai from $1.4002 late yesterday in New York, when it reached $1.4147, the weakest level since Oct. 1.
March-delivery copper on the Shanghai Futures Exchange was down 0.8 percent to 23,620 yuan ($3,455) a ton at 9:34 a.m. local time. China’s yuan rose 0.2 percent against the dollar at 9:33 a.m. in Shanghai.
“With the dollar going down and Chinese yuan going up, we expect Shanghai copper to fare weaker than its London counterpart in the near future,” HNA Topwin analysts wrote.
Among other LME-traded metals, aluminum was 0.6 percent up at $1,480 a ton and zinc rose 0.6 percent to $1,095.
To contact the reporter for this story: Li Xiaowei in Shanghai at xli12@bloomberg.net
