Copper Futures Recover from Recent Declines as Weaker Dollar Attracts Bargain Hunters

Copper futures on the New York Mercantile Exchange's Comex division rebounded from recent declines as a weakening dollar made dollar-denominated copper futures appear cheaper to buyers holding foreign currencies. The most-traded September contract rose 1% to $4.0070 per pound, while the thinly traded August contract gained 0.6% to $3.9875 per pound.

Key Takeaways:

• Copper prices have wobbled around the $4 level since a 12% correction at the start of August.
• A weaker dollar boosts demand among investors using foreign currencies, making dollar-denominated copper futures appear cheaper.
• China, the world's largest copper consumer, accounts for more than a third of global demand for the metal.
• Copper inventories on the Shanghai Futures Exchange fell 8,805 tons to 112,014 tons, marking the first decline in four weeks.
• Base metals analyst Leon Westgate of Standard Bank in London cited the inventory draw as a sign of Chinese demand increasing despite recent price weakness.
• Senior market strategist Adam Klopfenstein of MF Global warned that copper's prospects are muted by fears of a global economic slowdown, predicting prices to remain in the $3.90 to $4.10 range for the next few months.

Statistics:

• Copper futures rose 4.10 cents, or 1%, to $4.0070 per pound.
• Thinly traded August-delivery copper futures gained 2.30 cents, or 0.6%, to $3.9875 per pound.
• The dollar slipped against a trade-weighted basket of currencies, with the ICE Dollar Index recently at 73.693, down from 74.244 late Thursday in New York.
• China accounts for more than a third of global demand for copper.
• Copper inventories fell 112,014 tons, a decline of 8,805 tons.

Sources:

• Dow Jones Commodities News via Comtex, August 19, 2011.
• Dow Jones Newswires; Tatyana Shumsky; 212-416-3095; tatyana.shumsky@dowjones.com.