Copper Prices Slide as Dollar Rebound Curbs Commodity Demand

Feb. 3 (Bloomberg) -- Copper prices dropped, halting a two- day rally, after the rebounding dollar curbed demand for commodities as an alternative investment.

The U.S. Dollar Index, a gauge of the greenback's strength against six major currencies, rose as much as 0.5 percent, heading for the first gain this week. Copper futures fell 8.8 percent last month, the most since December 2008, as the currency basket gained 2.1 percent. The Reuters/Jefferies CRB Index of 19 futures fell as much as 1 percent.

"The dollar has been pushing commodity prices a bit," said Justin Lennon, a Mitsui Bussan Commodities Ltd. metals analyst in New York.

Copper futures for March delivery dropped 11.6 cents, or 3.8 percent, to $2.9735 a pound on the New York Mercantile Exchange's Comex unit. The price gained 1.2 percent in the first two days of this week.

The metal extended declines after a gauge of U.S. services industries showed that expansion last month trailed estimates, spurring concern that the nation's economic recovery is slowing.

The Institute for Supply Management's index of non- manufacturing businesses, which account for almost 90 percent of U.S. economic activity, rose to 50.5 in January from 49.8 in December. A reading above 50 indicates expansion.

Economists projected a reading of 51, the median of 75 estimates in a Bloomberg News survey.

"Industrials have been under pressure on the threat that we'll see a slowdown again," said Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago. "I'm in the double-dip camp, which of course would mean further" declines for copper prices.
LME Metals

On the London Metal Exchange, copper for delivery in three months dropped $225, or 3.3 percent, to $6,590 a metric ton ($2.99 a pound). Lead dropped the most among LME metals, falling 4.5 percent to $2,021 a ton after rising 3.5 percent yesterday.

Tin climbed 0.9 percent to $16,600 a ton in London. The metal may average $20,000 this year as the global economic recovery boosts demand, Wachid Usman, the president director of Indonesia's PT Timah, said today in Jakarta. Prices averaged about $13,421 in 2009.

PT Timah is the world's second-biggest producer of the metal, after China's Yunnan Tin Co.

Zinc and aluminum prices fell on the LME. Nickel rose.