Sep 15, 2011 NEW YORK (Dow Jones)--Copper prices climbed higher after the European Central Bank unveiled new measures to provide access to dollars for European central banks, easing fears that a liquidity crunch would paralyze the region's financial system.
The ECB said that major central banks including the U.S. Federal Reserve, Swiss National Bank, Bank of Japan and the Bank of England will make a coordinated push to improve European banks' access to dollars.
"This says that maybe Europe does not implode. We've taken some fear out of the market today and that trade is being unwound," said Frank Lesh, broker and futures analyst with FuturePath Trading in Chicago.
Copper futures roared to a high of $3.9800 a pound as traders flocked to purchase the industrial metal after the ECB announcement. Concerns that Europe's sovereign debt problems would spill into the region's banking system and arrest business activity have kept copper prices under pressure in recent weeks forcing the contract to settle at the year's lowest level Wednesday.
Copper is widely considered an economic bellwether with changes in price direction indicating shifts in the economic cycle. The red metal is used in making everything from laptops and air conditioners to household plumbing and tractors, and demand for copper tends to wane when business activity slows.
"There is much debate at the moment about how much of an impact on demand the current sovereign debt crisis will have and many have become convinced we are headed for another recession which will be negative for base metals," said traders at RBC Capital Markets.
Copper for December delivery, the most actively traded contract, was recently up 5.75 cents, or 1.5%, at $3.9555 a pound on the Comex division of the New York Mercantile Exchange. The contract set the day's highs at $3.9800 after the ECB announcement, well above yesterday's settlement price of $3.8980, the lowest settlement level this year.
Thinly-traded September-delivery copper was recently up 7.70 cents, or 2%, at $3.9620 a pound.