Apr 12, 2012 NEW YORK (Dow Jones)--Copper futures rallied alongside equities on a weaker dollar as dovish language from a Federal Reserve official stoked hopes of further stimulus.

The most-actively traded contract, for May delivery, rallied 8.10 cents, or 2.2%, at $3.7205 a pound on the Comex division of the New York Mercantile Exchange.

A robust rally in stocks fanned investor interest in growth-sensitive assets such as copper futures, helping copper prices to bounce off near-three-month lows. The Standard & Poor's 500 stock index was recently up 1.2% at 1384.77.

Copper is widely considered an indicator of economic health as its widespread applications in manufacturing and construction make demand for the metal sensitive to shifts in the pace of business activity.

"Copper is pretty much a reflection of the economy. If people believe that equities will keep moving higher, I think that copper deserve a place in people's portfolio," said Adam Klopfenstein, market strategist with Archer Financial Services.

Investor confidence caught a boost from dovish comments by William Dudley, president of the New York Fed and a permanent voting member of the central bank's policy-setting committee. Dudley said another round of stimulus hinges on how the U.S. economy evolves and pointed to patterns in 2010 and 2011, when economic data were bright early on and faded later into the year. Dudley also reiterated that interest rates will likely be kept low through late 2014.

A weaker dollar fanned demand for copper from investors using foreign currencies. Copper futures are denominated in dollars and the contracts appear cheaper to buyers holding other currencies when the U.S. currency eases.

Concerns about Europe's sovereign debt, which had pressured copper to a three-month low on Wednesday, faded after an Italian bond auction went off without a hitch. Italy sold EUR4.885 billion of bonds, against a target range of EUR3 billion to EUR5 billion, though yields were higher compared with the country's last debt sale.

"Given the broad-based strength across markets with equities showing gains and metals rebounding, it does look as though the markets have put aside the recent concerns about data and Spain's debt problems," William Adams, head of research at Fastmarkets.com, said in a note to clients. "As such, we would not be surprised to see further strength in the base metals in the short term, but would keep a wary eye on developments in [European Union] debt."

Copper traders are now turning their sights to China, which is due to release overnight its report on growth in first-quarter gross domestic product. China consumes about 40% of the world's copper and its economic health has a direct bearing on the global supply-and-demand balance for the industrial metal.

China's tight grip on lending, which siphoned off credit from construction and manufacturing companies last year as Beijing fought to cool runaway inflation and an overheated real-estate sector, has kept copper prices under pressure.

"We're waiting for the Chinese GDP numbers [Friday] and we're expecting to see some [loosening] language there," Klopfenstein said.

Copper settlements (ranges include electronic and pit trading):
Apr $3.7165; up 8.05 cents; Range $3.6805-$3.7165
May $3.7205; up 8.10 cents; Range $3.6340-$3.7310