BLBG: Copper Rises in London as Weak Dollar Boosts Commodity Appeal
Copper rose in London as a weaker dollar buoyed the appeal of commodities as an alternative investment to the U.S. currency.
The Dollar Index, which tracks the currency against a basket of six counterparts, fell for a third straight session, leading to gains from gold to oil. The link between copper and the euro- dollar exchange rate has strengthened, with a correlation of 0.485 in the second half, compared with 0.375 in the first six months. A reading of one would suggest the two move in tandem.
“It’s mostly the dollar weakness” that boosted commodities today, said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt. Oil prices, which gained after Israeli air strikes in the Gaza strip, will dictate base metal prices this week, he said.
Copper for delivery in three months added $25, or 0.9 percent, to $2,870 a metric ton as of 12:17 p.m. local time. The London Metal Exchange was closed Dec. 25 and 26 for holidays.
Gains in industrial metals may be limited by their expanding inventory, reflecting weaker demand, Weinberg said. Stockpiles of copper tracked by the LME rose 1.6 percent to 336,700 tons, the highest since February 2004. Including those monitored by the exchanges in New York and Shanghai, they totaled 380,224 tons, equivalent to 7.4 days of global demand, according to Bloomberg calculations. Last year’s average was 4.9 days.
Copper for March delivery added 2.3 cents to $1.3065 a pound on the Comex division of the New York Mercantile Exchange.
Manufacturing Slowdown
The Institute for Supply Management’s December factory Index, which tracks U.S. manufacturing activity, probably dropped to 35.4, the lowest reading in almost three decades, according to the median estimate of economists surveyed by Bloomberg News. Readings below 50 indicate contraction. The Tempe, Arizona-based ISM’s factory report is scheduled for Jan. 2.
Global aluminum inventories last month were 1.4 percent lower than in October to 1.6 millions tons, a report from the International Aluminium Institute showed.
Aluminum fell $20.75, or 1.4 percent, to $1,516.25 a ton.
Among other LME-traded metals, nickel advanced $272, or 2.8 percent, to $9,897 a ton and lead increased $20, or 2.4 percent, to $870 a ton. Tin fell $55 to $9,800 a ton and zinc dropped $16 to $1,134.
