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BASE METALS: Comex Copper Pares Gains On Stronger Dollar
Aug 2,2011 10:22CST
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Source:SMM
Copper futures were near flat Monday, as a relief rally over the U.S. debt deal was snuffed out by a stronger dollar.

Aug 01, 2011 (Dow Jones Commodities News via Comtex) -- --Comex September copper down 1.75 cents, or 0.4%, at $4.4620/lb.

--U.S. debt deal lifts sentiment, but concerns linger.

--Stronger dollar damps demand for dollar-denominated copper futures.

By Tatyana Shumsky
   Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Copper futures were near flat Monday, as a relief rally over the U.S. debt deal was snuffed out by a stronger dollar.

The most actively traded contract, for September delivery, was recently down 1.75 cents, or 0.4%, at $4.4620 a pound on the Comex division of the New York Mercantile Exchange.

Thinly traded August-delivery copper was down 0.80 cent, or 0.2%, at $4.4660 a pound.

The U.S. Democratic and Republican party leaders reached an agreement late Sunday to increase the national borrowing limit and cut spending by about $2.4 trillion over ten years.

The accord, which comes after weeks of wrangling that raised concerns the world's largest economy may default on its debts, must pass both the House and Senate and be signed into law by Tuesday to avert a U.S. default.

Copper prices, which lunged higher overnight on investor relief, pared their gains as traders took a closer look at the agreement. Analysts at Barclays Capital have called the deal a "band-aid approach" to government finances and said it doesn't preclude a U.S. 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.

"Our first impression is that the agreement by itself is unlikely to be sufficient to cause S&P to remove the US from being on ratings watch for possible downgrade," the bank said.

Copper's gains were also curbed by a stronger dollar, which gained ground on the euro in the wake of the U.S. debt announcement. Copper futures are denominated in dollars and appear more expensive to traders using foreign currencies when the greenback rallies.

The euro was recently at $1.4358, down from $1.4391 late Friday in New York.

Production disruptions at the world's largest copper mine remain a source of support for copper prices. BHP Billiton Ltd.'s (BHP) Escondida mine in northern Chile has been idled for 10 days by a worker strike that forced the operator to invoke 'force majeure' last week, releasing it from obligations to make deliveries. Copper mine production has struggled to keep up with growing demand for the red metal in recent years, and many analysts have forecast a slight shortfall in supply for this year.

 

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