(July 3): Copper edged higher, tracking small swings in the US dollar as investors continue to assess the outlook for US monetary policy.
The industrial metal was marginally higher on the London Metal Exchange (LME), trimming an earlier gain of 0.9% as a Bloomberg gauge of the dollar partially rebounded from a two-week low.
Copper and other metals came under pressure in June as the dollar rallied on the back of signals that policymakers will pursue tighter monetary policy. But bets on rate hikes have been pared back this week after Federal Reserve chairman Kevin Warsh on Wednesday said price risks are coming down.
Higher rates act as a headwind to metals demand by raising borrowing costs for manufacturers, while a strong dollar makes commodities like copper more expensive for buyers using other currencies.
“The dollar retreated following the decline in oil prices and weakening US employment data, which is benefitting copper,” said Li Xuezhi, head of research at brokerage Chaos Ternary Futures Co. “But the upsides will remain limited by continued weakness in traditional industries.”
See also: Aluminium falls to lowest since February as dollar strengthens
In other metals, aluminium traded little changed, having dropped back to pre-war levels on expectations of returning supplies from the Middle East. More vessels have been transiting the Strait of Hormuz since the US and Iran struck an interim peace deal last month, paving the way for smelters in the region to start ramping up operations.
Copper was 0.3% higher at US$13,364 a tonne on the LME as of 1.07pm local time. Aluminium was little changed at US$3,089.50 a tonne, while tin jumped 2.1%.
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