Copper Prices Fluctuate Amid US Debt Deal, Stronger Dollar

Copper futures experienced a relief rally after US lawmakers reached a deal to raise the national borrowing limit, but the gains were short-lived as a stronger dollar and concerns over the agreement's long-term impact curbed prices. As the US debt deal took shape, copper prices surged, only to pare their gains as traders took a closer look at the agreement. Analysts remain cautious, with some questioning the deal's effectiveness in preventing a US credit downgrade.

Key Takeaways:

Copper futures were near flat on Monday, with the September contract down 1.75 cents, or 0.4%, at $4.4620 a pound on the Comex division of the New York Mercantile Exchange.
The stronger dollar dampened demand for dollar-denominated copper futures, with the euro recently trading at $1.4358, down from $1.4391 late Friday in New York.
Analysts at Barclays Capital described the US debt deal as a "band-aid approach" to government finances and warned it does not preclude a US credit downgrade.
Two credit ratings agencies, Standard & Poor's and Moody's, have put America's AAA credit rating on review amid the debt limit crisis.
Production disruptions at the world's largest copper mine, BHP Billiton Ltd.'s Escondida mine in northern Chile, remain a source of support for copper prices, despite the temporary idling due to a worker strike.
Copper mine production has struggled to keep up with growing demand for the red metal in recent years, and many analysts forecast a slight shortfall in supply for this year.

Statistics:

Copper prices were down 1.75 cents, or 0.4%, at $4.4620 a pound.
The euro traded at $1.4358, down from $1.4391 late Friday in New York.
The US debt deal aims to reduce the national debt by about $2.4 trillion over ten years.
Copper mine production has struggled to meet demand in recent years, with many analysts forecasting a slight shortfall in supply for this year.

Sources:

Dow Jones Commodities News via Comtex (Aug 01, 2011)
Barclays Capital (as quoted in Dow Jones Newswires)
Standard & Poor's (as quoted in Dow Jones Newswires)
Moody's (as quoted in Dow Jones Newswires)
Dow Jones Newswires; Tatyana Shumsky; 212-416-3095; tatyana.shumsky@dowjones.com