Oct 19 (Bloomberg) -- Copper may rise in London after prices climbed to a 27-month high in Chinese trading amid speculation that the Federal Reserve might loosen policy further in an effort to stoke U.S. economic growth.

Copper for January delivery reached the highest intraday level since July 2008 in Shanghai today. Raw materials will rally if the Fed eases policy next month, UBS AG said, calling a second round of so-called quantitative easing a "game changer” for copper. Fed policy makers meet next on Nov. 2-3.

"Strong prices in Shanghai and expectations of quantitative easing by the Fed starting in November” may help to lift prices, said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt. Monetary easing "might give a boost to the U.S. economy and provide more liquidity to markets,” he said.

Copper for delivery in three months added $2 to $8,445 a metric ton at 10:12 a.m. on the London Metal Exchange. The contract touched $8,492, the highest intraday price since July 7, 2008. December-delivery copper fell 0.2 percent to $3.846 a pound on the Comex in New York.

Additional Fed measures to boost the world’s largest economy would increase capital flows to emerging markets, reinforcing commodity-intensive growth, UBS said in a note to clients today that summarized a commentary from Oct. 18.

Slumping Dollar

Speculation about further Fed easing has weighed on the dollar, which last week posted a fifth weekly retreat as measured by the U.S. Dollar Index, a six-currency gauge of the greenback’s strength. A weaker dollar stokes demand for commodities as an alternative investment and makes raw materials priced in the currency cheaper in terms of other monies.

LME copper has advanced 5.4 percent this month as the dollar index slumped 1.8 percent. Today the index climbed as much as 0.7 percent.

Figures due today at 1:30 p.m. London time may show that builders in the U.S. broke ground on 580,000 homes at an annual rate in September, down 3 percent from August. A drop would be the first since June, backing the case for the U.S. central bank to expand measures to protect the economic recovery.

The report is "likely to show that the housing sector continues to work off the excess inventory built up over the 2003-07 period,” said David Thurtell, a Citigroup Inc. analyst in London.

Higher Estimates

Construction accounts for a quarter of copper demand, according to the Copper Development Association. The U.S. is the world’s second-biggest copper consumer after China.

HSBC Holdings Plc raised 2011 and 2012 estimates for copper, saying "continued strength” across Asia will offset weakness in developed economies and support commodity prices. Prices may average $3.26 a pound ($7,188 a ton) in 2011 and $2.85 in 2012, up 16 percent and 19 percent, respectively, from earlier estimates, analysts including Daniel Kang wrote in a report yesterday.

The bank also increased estimates for prices of aluminum, nickel and zinc.

LME copper stockpiles slipped 0.1 percent to 369,950 tons, the lowest level since Oct. 26, 2009, exchange figures showed. Orders to draw copper from LME inventories, or canceled warrants, eased 2.2 percent to 22,200 tons.

Tin for three-month delivery on the LME added 0.2 percent to $26,700 a ton. Prices reached a record $27,338.50 on Oct. 14. The metal has jumped 57 percent this year, leading advances on the exchange, after production was disrupted in Indonesia and the Democratic Republic of the Congo.

Aluminum added 0.6 percent to $2,425 a ton and nickel rose 0.9 percent to $24,030 a ton. Lead gained 1.3 percent to $2,470 a ton and zinc climbed 1.4 percent to $2,457.75 a ton.