By Anna Stablum March 16 (Bloomberg) -- Copper gained in London after reaching a two-week low as a weaker dollar spurred demand for commodities denominated in the currency and inventories monitored by the London Metal Exchange shrank. The U.S. Dollar Index, a six-currency gauge of the greenback’s value, declined as much as 0.2 percent today before a U.S. Federal Reserve meeting. A softer U.S. currency makes dollar-priced metals cheaper for those holding other monies. Copper stockpiles fell to the lowest in eight weeks. “Copper is marginally stronger, recouping yesterday’s losses, which may have been slightly overdone,” said Randy North, a trader at RBC Capital Markets in London. “With the market waiting for the FOMC tonight, we don’t expect any major fireworks,” he said, adding that prices will be “heavily influenced” by the dollar. Copper for delivery in three months rose $70, or 1 percent, to $7,375 a metric ton at 9:15 a.m. on the LME. Copper for May delivery gained 0.8 percent to $3.3415 a pound on the Comex in New York. Copper fell as much as 2.4 percent to $7,270 a ton yesterday, the lowest since March 2, as the dollar rose and on concern that demand from China, the world’s largest consumer, may weaken because of steps aimed at cooling economic growth. The dollar weakened before the Fed’s decision on interest rates at 6:15 p.m. in London today. All 90 economists surveyed by Bloomberg News forecast the Fed will keep the benchmark interest rate at a record-low range of zero to 0.25 percent. Since March 2009, the policy makers have said “exceptionally low” rates are likely warranted for “an extended period.” Total Stockpiles Drop Stockpiles of copper in LME-monitored warehouses fell for a 10th day to the lowest since Jan. 20, to 528,050 tons. Metal booked for removal from warehouses slid for a second day, down 11 percent to 23,150 tons and down 13 percent in a week. Aluminum for three-month delivery on the LME gained 1.1 percent to $2,251.75 a ton and zinc rose 0.9 percent to $2,301 a ton. In China, aluminum and zinc stockpiles have increased to more than double the amount stored in warehouses monitored by the Shanghai Futures Exchange after output jumped, according to CBI China Co. Inventories held at commercial warehouses in Shanghai, and in Guangdong, Zhejiang and Jiangsu provinces, were about 965,000 tons as of yesterday, up from 626,000 tons at the end of 2009, CBI analyst Eric Zhang said. That includes the 387,549 tons in storehouses surveyed by the exchange and stockpiles outside the bourse’s area, he said. Smelters in China have started up plants halted during the world’s biggest postwar economic slump as aluminum prices advanced 39 percent and zinc gained 73 percent in the past year in Shanghai. Nickel rose 1.9 percent to $21,900 a ton, lead advanced 0.8 percent to $2,221 a ton and tin gained 0.8 percent to $17,581 a ton. To contact the reporter on the story: Anna Stablum in London at astablum@bloomberg.net.

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