Commodities rose for a second day on speculation China’s demand will strengthen after the nation’s currency rose to a 17-year high, boosting the purchasing power of the world’s top consumer of energy and industrial metals. The Standard & Poor’s GSCI Index of 24 commodities rose 0.6 percent by 10:41 a.m. in London. Copper gained 3 percent and oil advanced 0.4 percent. Gold futures were little changed. Raw materials prices have doubled since the end of 2004 as growth in China buoyed demand for everything from metals used in cell phones to laptops to sugar and corn. The increased value of the yuan against the dollar would make imports cheaper. “It’s now back a little bit to risk-on trade,” said David Thurtell, head of metals research at Citigroup Inc. in Singapore. The yuan’s advance “is definitely good for commodities as that allows China to import more, and it’s a sign that the government is confident enough about the strength of domestic demand and cares less about exports,” he said. Commodities rallied in eight out of 10 years through 2010, driven by demand in China where urbanization and population growth spurred consumption of coal, grains and metals. Above- target consumer prices forced policy makers to increase interest rates and banks’ reserve ratio to rein in the growth, adding to investors’ concerns about global slowdown as governments in the U.S. and Europe battled with piling debts. China may adopt “targeted easing” in the second half to support financing for agriculture, small business and social housing, the China Securities Journal reported today. Increased Rates The People’s Bank of China has increased interest rates five times since September and boosted major lenders’ reserve - requirement ratios to a record 21.5 percent. Chinese copper imports expanded 9.5 percent to the highest level since January last month, according to customs data. Still they were 11 percent lower than 342,901 tons a year ago. Copper for delivery in three months gained 3 percent to $8,852.75 a metric ton on the London Metal Exchange. The contract closed at the lowest since December yesterday because of concerns the growth outlook will worsen. Standard & Poor’s cut the U.S. credit rating by one notch to AA+ after the political impasse over debt crisis. Many investors are holding a lot of cash and looking for the right time to get back into financial markets, Thurtell said. “It’s not a repeat of the second half in 2008. It’s going to be tough but we’ll muddle through.” Immediate-delivery gold was 0.2 percent lower at $1,789.03 an ounce. The futures for December delivery rose 0.4 percent. Higher Margins CME Group Inc., the world’s largest futures market, raised margins on gold contracts 22 percent with effect from the close of business today, prompting investors to sell the metal after a four-day rally. Crude oil for September delivery increased 0.2 percent to $83.04 a barrel on the New York Mercantile Exchange. Corn and soybeans gained ahead of the U.S. Department of Agriculture report due at 8:30 a.m. in Washington today that may show the agency cutting its estimates on the nation’s harvests as hot weather curb yields. Corn for December delivery advanced 0.6 percent to $6.925 a bushel on the Chicago Board of Trade and soybeans increased 1.3 percent to $13.1775 a bushel. Wheat for December delivery gained 0.7 percent to $7.2425 a bushel. To contact the reporter on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

Source