Copper dropped to the lowest in six months in Asia and zinc was near its lowest in more than two-and- half years as the dollar rallied, reducing buying of commodities as an alternative asset and inflation hedge.
The dollar gained 6 per cent the past month against its six major counterparts, while an index tracking six industrial metals fell 13 per cent in the same period. Copper inventories stood at a six-month high amid slow seasonal demand.
“The dollar continued its rampage in Asian hours and showed little patience with any resistance from other major currencies,’’ Mitul Kotecha, head of foreign-exchange research in London at Calyon, the investment-banking unit of Credit Agricole SA, wrote in a report on Tuesday. “At the moment there appears to be little respite for commodities.’’
Copper for delivery in three months dropped by as much as 1.1 per cent to $7,251 a metric tonne on the London Metal Exchange, 19 per cent below the record $8,940 set July 2. That’s the lowest intra-day price since February 6. Zinc fell as much as 1.5 percent to $1,665 a tonne, near yesterday’s drop to $1,652 the lowest since November 2005.
Copper for October delivery fell 1.4 per cent to close at 56,420 yuan ($8,220) a ton on the Shanghai Futures Exchange.
Open Interest
Open interest surged to more than 190,000 contracts this week, the highest since January, Wang Lei, an analyst at Haitong Futures Co., said. Rising open interest combined with falling prices indicates traders and investors may be establishing short positions, or bets prices will drop.
Copper imports by China, the world’s largest user, fell 12 per cent in the first seven months from a year ago, customs data showed yesterday. Still, July imports rose 7 per cent from the previous month.
The year-on-year decline in imports ``exacerbated investors’ concern for Chinese demand,’’ Wang said in the report. The drop in Shanghai copper was widening the price gap with London which recently narrowed, Wang added.
China’s inflation cooled for a third month on slower food- price gains, a report from the statistics bureau showed on Tuesday. That gives the government more room for measures to boost economic growth. The country has already loosened bank lending quotas, raised tax rebates for some exports and halted the yuan’s appreciation against the dollar.
China, the world’s fourth-biggest economy, had been tightening bank credit to cool over investment and inflation. The credit tightening would cause a 10 per cent cut in Chinese consumption of copper, according to Maike Metal International Group, China’s largest importer of the metal.
“Further loosening in government policies, which is likely to occur after the Olympics, will immediately help commodities markets rebound,’’ Haitong analyst Li Jingyuan said on Tuesday by phone from Shanghai. “Copper looks to be oversold anyway,’’ Li added.
Among other LME-traded metals, aluminum was 0.1 per cent down at $2,829, nickel gained 0.8 per cent to $18,150, tin declined 1.9 per cent to $18,400, and lead fell 1.9 per cent to $1,889.
