Mar 26, 2012 NEW YORK (Dow Jones)--Copper futures settled higher Monday on Federal Reserve Chairman Ben Bernanke's dovish comments and a weaker dollar.
The most actively traded contract, for May delivery, rallied 8.50 cents, or 2.1%, to settle at $3.8875 a pound on the Comex division of the New York Mercantile Exchange.
"A few more days like this and we'll be at $4," said Bill O'Neill, a principal at Logic Advisors, of copper's robust run-up.
Bernanke said the bank's policy of keeping interest rates low should help a recovery in the U.S. labor market and the broader economy.
"Further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies," Bernanke said in prepared remarks to the annual conference of the National Association for Business Economics.
The comments ameliorated concerns that a recent flurry of stronger U.S. economic data would see the Fed tighten its monetary policy sooner than the late 2014 time period the central bank had indicated.
Copper also drew strength from a weaker dollar, which eased against a basket of international currencies. As the dollar weakens, the price of dollar-denominated commodities like copper become more attractive to foreign investors in their home currency terms, enticing them to enter the market as buyers.
Copper's rebound comes after a sharp decline last week, prompted by weak manufacturing data out of China, the world's top consumer of the metal.
"Last week's selloff was a significant over reaction," O'Neill said. "The Chinese situation has been exaggerated. The economy is still moving at a decent pace... there's much too much gloom and doom about global demand [for copper]."
Earlier in the day, copper also caught a boost on data showing business confidence in Germany improved in March. The Munich-based Ifo Institute's closely watched business confidence index rose for the fifth month in a row in March, to 109.8 points, beating expectations of a slight decline.
Copper has broad applications across a wide range of economic sectors and demand for the metal tends to increase as business activity gains traction.
Elsewhere, a 7.1 magnitude earthquake struck central Chile Sunday, the same area that was ravaged by a massive 8.8 earthquake in late February 2010. Chilean news media reported electrical blackouts and broken phone lines.
"Given the currently tight supply situation on the global copper market, any supply outages would almost certainly have driven prices up," said Commerzbank.
Copper settlements (ranges include electronic and pit trading):
Mar $3.8855; up 7.60 cents; Range $3.8220-$3.8930
May $3.8875; up 7.90 cents; Range $3.7950-$3.8940