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Copper Declines in New York on Stronger Dollar, Chinese Credit Tightening

iconOct 13, 2010 10:24
Source:SMM

Oct 12 (Bloomberg) -- Copper fell in New York after the dollar strengthened and China, the world’s biggest user of the metal, moved to curb bank lending to cool its economy.

The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, added as much as 0.6 percent. China’s central bank raised reserve requirements for six banks for a two-month period, three people with knowledge of the matter said.

"The currency is still the dominant driver in the market today,” said Daniel Major, an analyst at RBS Global Banking & Markets in London.

Copper for delivery in December dropped 2 cents, or 0.5 percent, to $3.7695 a pound at 8:09 a.m. on the Comex in New York. Prices yesterday touched the highest level since July 8, 2008. Copper for delivery in three months slipped 0.1 percent to $8,283 a metric ton on the London Metal Exchange.

Prices rebounded from today’s lowest levels as the dollar index, last up 0.3 percent, pared gains. A stronger U.S. currency makes dollar-priced metals more expensive in terms of other monies and saps demand for commodities as an alternative investment.

Comex copper’s 14-day relative strength index, a gauge of whether a commodity is overbought or oversold, was at 67.5 after last week rising above 72. Some analysts and traders who study technical charts view readings above 70 as a sign that prices may be poised to fall.

Overextended Prices

"Prices are just looking a little overextended after the recent gains,” RBS’s Major said. Copper may drop for three to four weeks after this week, he said.

China has moved this year to restrain economic growth in response to concern about potential inflation. Officials in April ordered developers not to take deposits for sales of uncompleted apartments without proper approval and clamped down on loans for third-home purchases to cool rising prices.

While the increased reserve requirement is “hardly surprising,” such steps “affect sentiment more than anything,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. Copper “still looks strong,” he said.

Copper consumption will outpace supply this year by 58,000 tons as demand increases and supplies are disrupted, Standard Bank Plc said. Until now, it predicted a surplus.

LME copper stockpiles fell 0.2 percent to 371,750 tons, daily exchange figures showed. Orders to draw copper from LME stocks, or canceled warrants, slid 2.8 percent to 24,600 tons.

Tin, Aluminum

Tin for three-month delivery on the LME rose 1 percent to $26,450 a ton. Prices touched a record $26,790 on Oct. 6. The metal has jumped 56 percent this year, leading advances on the exchange, after production was disrupted in Indonesia and the Democratic Republic of the Congo.

PT Timah, the world’s largest tin exporter, may miss a production target this year because of heavy rains and the Indonesian company is trying to renegotiate supplies with long- term customers. Timah may produce 40,000 tons, compared with a goal of 45,000 tons, Corporate Secretary Abrun Abubakar said in an interview.

Aluminum rose 0.9 percent to $2,422 a ton. Demand may outpace production by 700,000 tons next year as usage in China increases and exchange-traded products take metal away from the market, according to research group Harbor Intelligence.

Nickel dropped 0.7 percent to $24,150 a ton, lead was unchanged at 2,315 a ton and zinc gained 0.3 percent to $2,336 a ton.

              


 

 

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