Copper in London, New York Surges to 27-Month Highs on Fed Easing Concerns

Copper in London and New York surged to 27-month highs on speculation that the Federal Reserve will increase measures to stimulate the U.S. economy, weakening the dollar and boosting demand for commodities as alternative investments. The metal jumped to a six-month high in Shanghai. 

Three-month delivery copper rose as much as 0.9 percent to $8,388 a metric ton, the highest price since July 2008, before trading at $8,368.25 a ton at 11:13 a.m. in Singapore. Futures for December delivery on the Comex in New York gained as much as 1.2 percent to $3.82 a pound, also the highest since July 2008, before trading at $3.8095 a pound. 

“There’s just too much liquidity around and people want to put their money somewhere,” Li Qiang, an analyst at Xinhu Futures Co., said from Shanghai. “The expectations for looser monetary policy in the U.S. will weigh on the dollar and keep commodities supported.” 

January-delivery copper on the Shanghai Futures Exchange gained as much as 4.7 percent to 63,480 yuan ($9,516) a ton, the highest level since April 12, and traded at 62,990 yuan at the midday break. Shanghai zinc futures jumped by the daily 5 percent limit to a five-month high. 

A rally in agricultural markets also helped support metals prices today as investors boosted commodity holdings, according to Hongyuan Futures Co. Corn, soybean and palm oil futures on the Dalian Commodity Exchange, cotton futures on the Zhengzhou Commodity Exchange and rubber futures in Shanghai all soared by their daily limits today. 

“In the short term, domestic commodities will benefit from an appreciation of the yuan, so speculators are just pouring money into the market,” said Hongyuan’s Beijing-based analyst Yang Jun. “Once the exuberance dies down, investors may find a stronger yuan will hurt Chinese exports and have a negative impact on demand for raw materials.” 

Currency Plays

The dollar declined for a second day against a six-currency basket after a report last week showed bigger-than-expected job cuts, boosting prospects the Fed may use quantitative-easing measures to spur the economy. It fell toward an eight-month low against euro and touched a 15-year low versus the yen before the release of the Fed’s Sept. 21 policy meeting minutes tomorrow. 

Debate about competitive devaluations dominated discussions as finance ministers and central bankers gathered for meetings at the International Monetary Fund from Oct. 8 through yesterday. China faces demands from Western nations to let the yuan rise more quickly at a time when the U.S. is trying to trim its trade deficit and European nations are attempting to stem an outflow of manufacturing jobs. 

A “very fast” appreciation probably wouldn’t bring balance to the world economy, People’s Bank of China Governor Zhou Xiaochuan said yesterday. Separately, Zhou also said China aims to avoid any “shock therapy” in its currency reform. 

Zinc in London added 2 percent to $2,336 a ton, lead climbed 1.7 percent to $2,310 a ton and nickel gained 1.2 percent to $24,700 a ton. Aluminum advanced 0.2 percent to $2,425 a ton, the highest price since April 19, while tin jumped 1 percent to $26,600 a ton as of 12:04 p.m. in Singapore.Source: Bloomberg