LONDON: Copper prices hit two-month highs on Tuesday, spurred by the retreating dollar, upbeat economic data from China, the world’s largest consumer, and optimism about United States interest rate cuts.
Benchmark copper on the London Metal Exchange was up 0.9 percent at USD9,971 a metric ton at 1606 GMT after reaching an earlier high of USD9,984.50.
Traders said the dollar backing away from session highs after the New York open had prompted some funds to cut their short copper positions.
A softer US currency makes dollar-priced metals cheaper for holders of other currencies, which could boost demand. Funds use this relationship to buy and sell copper using signals from numerical models.
Surveys of purchasing managers in China’s manufacturing sector showing expansion in August due to a rise in new orders indicate healthier demand prospects for industrial metals.
Reinforcing this is the Yangshan copper premium, a gauge of China’s appetite for importing copper. At USD55 a ton, it is up from USD29 a ton on July 8, though still roughly half the USD100 a ton level seen in May.
Overall, however, higher copper stocks in LME-registered warehouses suggest weaker demand outside China.
At 158,775 tons, they have climbed 75 percent since late June.
Higher LME copper stocks have also reinforced the significant discount for the cash over the three-month forward at around USD85 a ton.
Markets are now looking ahead to a meeting of the Federal Reserve on September 16-17, when the central bank is expected to cut rates, which could weaken the dollar and boost metals.
Clues to whether the Fed will go ahead with cuts will come from the monthly US jobs report due on Friday.
Elsewhere, rising stocks of tin, up more than 30 percent to 2,175 tons since August 18, have eased some concerns about availability on the LME market, but not enough to narrow the hefty premium for cash over the three-month.
Three-month tin retreated 0.6 percent to USD34,745, aluminium gained 0.3 percent to USD2,618, zinc gained 0.9 percent to USD2,859, lead fell 0.5 percent to USD1,994 and nickel ceded 1.4 percent to USD15,215 a ton.