FRX: COMMODITIES-Wheat, corn jump on index fund buying
* Wheat jumps 2 pct on commodity index fund buying
* Corn up 1 pct
* Other markets mixed despite dollar's fall
By Barani Krishnan
NEW YORK, Jan 8 (Reuters) - Heavy wheat buying by commodity index funds as part of a seasonal portfolio adjustment helped grain prices rally nearly 2 percent on Friday, while other commodities saw mixed results despite a weaker dollar.
Wheat's fundamental outlook is bearish due to plentiful world supplies and sluggish export demand.
But traders had been anticipating the market to benefit from an infusion of investments this week from commodity index funds, underscoring Wall Street's view of grains as undervalued assets.
"Wheat rallied to the highs when the dollar began falling," said Shawn McCambridge of Prudential Bache Commodities.
Index funds completed the run-up with a storm of buying in the final minutes of trading on the Chicago Board of Trade's wheat market.
CBOT's March wheat settled up 10-3/4 cents, 1.93 percent, at $5.68-1/2 per bushel. Buying interest picked up as the contract broke through its 200-day moving average near $5.68 and peaked at $5.70, its highest level since Dec. 4.
The market also got a boost from a setback in the dollar, which makes U.S. grains more competitive on the world market.
The dollar suffered its biggest loss against a basket of six currencies in a month and a half after an unexpected drop in U.S. nonfarm payrolls dented expectations that interest rates will rise any time soon.
Corn is another grain that rallied with wheat.
CBOT's front-month March corn settled up 5-1/2 cents, 1.3 percent, at $4.23 a bushel.
But corn stayed below the 6-1/2-month high set early this week at $4.26-1/4, despite attracting heavier index buying than wheat, with about 8,000 contracts for March snapped up.
"Corn is the new darling for funds," said Roy Huckabay, analyst for Chicago-based trade house The Linn Group. "There is still a lot of money that wants to come into the agriculture sector."
Copper fell after weaker-than-forecast U.S. employment data dimmed hopes for a brisk recovery in the world's largest economy and hurt demand prospects for industrial metals.
Benchmark copper for March delivery on the New York Mercantile Exchange's COMEX division fell 2.65 cents to finish at $3.4005 per lb, after dealing between $3.3915 and $3.4480.
On the London Metal Exchange (LME), copper for three-month delivery shed $70 to close to $7,465 a tonne, near the bottom of its $7,456-$7,575 range.
Sugar closed down too on profit-taking.
London's benchmark March white sugar futures finished down $6.10 at $726.20 per tonne, retreating from Thursday's record peak of $748.00 per tonne. Dealers, however, have a bullish near-term price projection above $750 per tonne.
New York's raw sugar futures for March dropped 0.47 cent, or 1.7 percent, to settle at 27.53 cents per lb., below Thursday's 29-year peak of 28.95 cents.
Oil prices rose slightly as concerns about gasoline supplies following a Canadian refinery outage outweighed the bearish U.S. job data.
U.S. crude oil rose 9 cents to settle at $82.75 a barrel after a fire at Korea National Oil Corp's Newfoundland refinery damaged the plant's 115,000 barrel per day facility's Isomax unit, hitting gasoline production.
