Copper Rises as Weaker Dollar Boosts Demand for Inflation Hedge

LONDON, Sept. 28 -- Copper prices rose after the dollar weakened, boosting the metal's appeal as a hedge against inflation, and exchange-monitored inventories declined.

    The U.S. Dollar Index fell as much as 0.5 percent today, the third decline in four sessions. Some traders buy dollar-priced commodities when the currency weakens to preserve purchasing power. Stockpiles tallied by the London Metal Exchange and the Shanghai Futures Exchange slipped, a sign that copper demand may be rising. Prices sank for a fourth straight week.

    "After building for several weeks, LME and Shanghai copper stocks fell today, which could help to stem the slide in prices," analysts at Barclays Capital said in a report.

    Copper futures for December delivery rose 3.1 cents, or 1.1 percent, to $2.7405 a pound on the New York Mercantile Exchange's Comex division. For the week, copper slipped 1.6 percent. The most-active contract has dropped every week since Aug. 28 after doubling this year through last month.

    Earlier, copper slid as much as 1.3 percent after an unexpected drop in U.S. durable-goods orders stoked concern that the pace of recovery from the deepest recession in seven decades is slowing in the world's biggest economy. Orders for longer- lasting items fell 2.4 percent last month from July, the Commerce Department reported in Washington.

    "We're going to have to get a lot more negative news on the economy before copper will be significantly hurt," said Frank McGhee, the head metals dealer at Integrated Brokerage Services LLC in Chicago. "The lower dollar can help support prices."

    Home Sales Rise

    The metal also climbed today after a Commerce Department report showed sales of new U.S. homes climbed 0.7 percent in August to an annual pace of 429,000 units, the highest level in almost a year. Builders are the biggest copper consumers.

    "The U.S. is a global bellwether," said Mark Heyhoe, a Hanson Westhouse Ltd. analyst in London. "New-home sales are an indicator of growing demand, and better numbers should support commodity prices. China has been the big story for the last couple of years, but we are beginning to look at where demand is going to pick up elsewhere."

    In London, copper for delivery in three months rose $30, or 0.5 percent, to $5,990 a ton ($2.72 a pound) on the LME.

    Among other metals for three-month delivery traded on the LME, tin, lead and zinc also gained. Nickel and aluminum fell.

    (Source: Bloomberg)