BLBG: Copper Has Biggest Monthly Drop Since 2008 as Dollar Advances
By Pham-Duy Nguyen
Jan. 29 (Bloomberg) -- Copper fell, capping the biggest monthly drop since 2008, as the dollar’s rally reduced the investment appeal of commodities, including metals.
The greenback rose to a five-month high against a basket of major currencies after a report showed the U.S. economy expanded at the fastest pace in six years. In January, copper dropped 8.8 percent, the most since December 2008. Global inventories monitored by major futures exchanges have climbed to the highest level since 2004.
“The strength in the dollar is pushing back a lot of the metals, including copper,” said Tom Hartmann, an analyst at Altavest Worldwide Trading LLC in Mission Viejo, California. “You would think that a stronger economy would improve demand for commodities, but now, it’s helping the dollar.”
Copper futures for March delivery fell 4.55 cents, or 1.5 percent, to $3.0525 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the price touched $3.049, the lowest level for a most-active contract since Nov. 27.
On the London Metal Exchange, copper for delivery in three months slid $153, or 2.2 percent, to $6,745 a metric ton ($3.06 a pound).
The Reuters/Jefferies CRB Index of 19 raw materials headed for the biggest monthly drop since November 2008.
Interest-Rate Concerns
A recovering economy may allow the Federal Reserve to raise interest rates sooner than forecast, boosting the value of the dollar, Hartmann said. The Fed has kept rates at zero percent to 0.25 percent since December 2008 to boost the economy.
Inventories monitored by the LME, Comex and Shanghai Futures Exchange have climbed for seven straight months to 736,163 tons, the highest level since January 2004.
“China’s got very high copper stockpiles,” said Charles Kernot, a mining analyst at Evolution Securities Ltd. in London. “One would have to question how much more buying one can expect from them.”
China took steps to curb lending this month.
“Base-metals prices could continue to be under pressure as the market contemplates the potential consequences of tightening of monetary policy in China,” Deutsche Bank AG said in a report today.
Aluminum, tin, zinc and lead prices also fell in London. Nickel rose.
To contact the reporters on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net
