Copper Climbs As US Downgrade Fears Lift

Nov 22, 2011 NEW YORK (Dow Jones)--Copper futures ended higher Tuesday as credit-rating firms soothed fears of a U.S. downgrade triggered by the congressional stalemate over debt reduction.

Investors have worried that the failure of the congressional supercommittee to reach accord on cutting $1.2 trillion from the U.S. budget deficit over the next two years would lead to another downgrade of the U.S. Treasury's credit rating and rattle global markets. Such steps would raise the cost of borrowing across the U.S. economy and potentially hurt an already fragile economic recovery.

Those fears eased after rating firms Standard & Poor's Ratings Services and Moody's Investors Service both said the supercommittee's failure wouldn't immediately lead to a downgrade of the U.S. debt rating.

Copper prices bounced off one-month lows in reaction to the news, with the most-active contract, for December delivery, rallying 3 cents, or 0.9%, to settle at $3.3330 a pound on the Comex division of the New York Mercantile Exchange.

Thinly traded November delivery copper rose 3.15 cents, or 1%, to settle at $3.3305 a pound.

The industrial metal is used in electronics and electrical equipment, construction, and manufacturing. These wide applications leave copper prices sensitive to shifts in economic activity.

"Some traders may wish to continue to simply use copper as a leading indicator to evaluate trading decisions in outside markets," analysts at optionsXpress said in a note to clients.

A weaker dollar fanned demand for dollar-denominated assets like copper, which seem less expensive to buyers who use other currencies when the greenback eases. The ICE Dollar Index was recently down 0.2% at 78.204.