NEW YORK--Copper futures paused after a three day rally Wednesday amid investor caution as the Federal Reserve kicked off its two-day policy setting meeting.
The most actively traded contract, for December delivery, was recently down 1.15 cents, or 0.3%, at $3.6855 a pound on the Comex division of the New York Mercantile Exchange.
Germany's highest court approved the creation of the euro zone's permanent bailout facility, but insisted the country keep its veto on all of the vehicle's decisions. The ruling ensures that the European Stability Mechanism comes into force as planned, creating a 500 billion euros ($645 billion) pool of aid for troubled euro-zone states.
The euro advanced against the dollar on the decision, giving dollar-denominated copper a boost to a fresh intraday four-month high of $3.7315 a pound. The euro was recently up 0.3% at $1.2880.
Dollar-denominated copper becomes cheaper for buyers who use other currencies when the dollar weakens.
However, caution set in as the Federal Open Market Committee, the Fed's monetary policy arm, began its closely watched two-day meeting in Washington. Market participants anticipate a new round of accommodative measures from the central bank, especially in the wake of August's paltry employment report which underscored continued weakness in the labor market.
Copper prices have gained 4.8% over a three-day winning streak triggered by the Friday release of U.S. employment data.
"We expect to see continuation in recent price strength in industrial metals and materials ahead of the Fed FOMC meeting," analysts at Deutsche Bank said in a note to clients.
Copper is primarily used to make electrical wiring and pipes, materials used in manufacturing and construction. Demand for such materials would increase if a new stimulus program succeeds in rousing economic growth.
However, copper's recent price gains could be reversed if the government stimulus doesn't follow through into actual physical demand, Deutsche Bank warned.
Write to Tatyana Shumsky at tatyana.shumsky@dowjones.com
