LONDON, Sept 20 (Reuters) - Copper climbed to a fresh five month peak on Monday, buoyed by a falling dollar and market talk of further quantitative easing in the United States.
By 0939 GMT, copper for three month delivery CMCU3 on the London Metal Exchange traded at $7,776 a tonne from $7,720 at the close on Friday. The metal, used in power and construction, hit $7,812 earlier on Monday, its highest level since April 26.
"The market continues to trade higher," said RBC Capital Markets trader Randy North. "It's following the weaker dollar.
"The copper supply situation is still pretty tight."
The dollar slipped broadly on speculation the Federal Reserve may flag the need to inject more stimulus into the struggling U.S. economy when it announces its latest policy decision on Tuesday. [USD/]
A weak U.S. currency makes metals priced in dollars less expensive for holders of other currencies.
"Dollar weakness translates into base metals strength," added North. "Whatever action the Fed takes and resulting impact on the dollar, if the dollar continues to weaken, you'll see support in the copper price."
Analysts also say that if the U.S. pumps more money into the economy, it will further boost fund buying, which has helped lift base metals prices in recent weeks.
Also aiding overall sentiment in recent months has been a growing trend of falling LME inventories.
The Latest LME data showed that on Friday, copper stocks slipped 1,700 tonnes to 382,500 tonnes, having fallen from 6-1/2 year highs at 555,075 tonnes in mid-February.
Aluminium CMAL3 touched $2,223, its highest level since Aug. 6 but was last at $2,216 versus a last bid at $2,180.
LME stocks for the metal, used in transport and packaging, shed 5,050 tonnes to 4.38 million tonnes. A large portion of those aluminium stocks are tied up in finance deals. [ID:nGEE5BA277]
ETF TALK HEATS UP
A recent rise in cancelled warrants -- material earmarked for delivery -- has also helped boost sentiment. The latest LME data showed that aluminium cancelled warrants were at 251,825 tonnes from 150,875 tonnes the day before.
"There is speculation, and it is just speculation, that this is further evidence of the pre-imminent launch of an ETF," David Thurtell, analyst at Citi said on aluminium.
Market talk of a possible physical copper ETF was also evident. UK-based ETF Securities declined on Monday to comment on talk that it is planning to soon launch a physcially backed copper exchange traded product (ETP). [ID:nLDE68J0PH]
"It may just be chat ahead of LME week next month or maybe just investor idle speculation following on from even stronger rumours that two investment banks (with backing from Glencore and RUSAL) are looking into a physical aluminium ETF for the end of 2010," Bernstein Research said in a note.
Trading was expected to slow this week however, due to a market holiday in Japan on Monday and Chinese holidays from Wednesday to Friday. China, the world's top metals consumer, will also be shut for a week from Oct 1. HOLIDAY
On a thin economic calendar on Monday, investors await housing data from the United States for further direction as the session progresses.
Among other metals, steel making ingredient nickel CMNI3 traded at $23,400 from a final bid at $23,200 on Friday.
Battery material lead CMPB3 was at $2,221 from $2,202.50, while zinc CMZN3 traded at $2,194 a tonne from $2,151 and tin CMSN3 was at $23,700 from $23,600.
On Friday, tin, used in electrical solder, hit a two year high at $23,800 a tonne.
"Shipments from Indonesia, the world's largest exporter may fall as much as 19 percent this year according to the trade ministry," investment bank Fairfax said in a note. "Expectations are for exports to fall to about 80,000 tons this year from close to 100,000 in 2009 as severe weather impacted mining.
Metal Prices at 0943 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Pct Move End 2009 Ytd Pct
move COMEX Cu 354.15 2.45 +0.70 334.65 5.83 LME Alum 2210.00 56.00 +2.60 2230.00 -0.90 LME Cu 7771.00 51.00 +0.66 7375.00 5.37 LME Lead 2216.00 13.50 +0.61 2432.00 -8.88 LME Nickel 23350.00 100.00 +0.43 18525.00 26.05 LME Tin 23575.00 -25.00 -0.11 16950.00 39.09 LME Zinc 2189.00 38.00 +1.77 2560.00 -14.49 SHFE Alu 15760.00 70.00 +0.45 17160.00 -8.16 SHFE Cu* 60250.00 150.00 +0.25 59900.00 0.58 SHFE Zin 18105.00 150.00 +0.84 21195.00 -14.58 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
