FX:Copper rebounds but gains limited as China worries linger
Forexpros - Copper futures edged higher on Wednesday, as the previous day’s steep decline to an eight-day low created bargain buying opportunities for investors, though gains were capped as worries about a “hard landing” in China persisted.
On the Comex division of the New York Mercantile Exchange, copper futures for May delivery traded at USD3.851 a pound during European morning trade, gaining 0.54%.
It earlier rose by as much as 0.85% to trade at a session high USD3.870 a pound.
Copper prices tumbled nearly 2% on Tuesday, the biggest daily drop in two weeks, as losses were fuelled by concerns over a deeper-than-expected slowdown in Chinese economic growth after mining giant BHP Billiton said that Chinese demand for iron ore was “flattening out."
The comments followed the recent downward revision in China's growth target and a larger-than-expected trade deficit.
A deeper slowdown in China, the world’s second biggest economy, would impair a global expansion that is already faltering because of the implementation of harsh austerity measures in Europe.
The industrial metal is regarded as a leading indicator of the global economy. It is used in the construction of buildings, power generation and transmission and the manufacture of consumer electronics.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
But prices found support on the view that the economic recovery in the U.S. is gaining traction. Government data on Tuesday showed that number of building permits issued in the U.S. in February rose to the highest level since October 2008, while housing starts dipped only slightly.
Increased activity in the property sector can boost demand for copper as construction material.
Weakness in the U.S. dollar provided further support. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.23% to trade at 79.69.
A weaker dollar boosts demand for raw materials as an alternative investment and makes dollar-priced commodities cheaper for holders of other currencies.
Elsewhere on the Comex, gold for April delivery rose 0.55% to trade at USD1,655.95 a troy ounce, while silver for May delivery climbed 1.25% to trade at USD32.23 a troy ounce.
