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Zinc and Copper fall as Dollar Rallies

Copper Falls as Dollar Rallies, U.S. Service Industry Declines

By Millie Munshi and Anna Stablum

Aug. 6 (Bloomberg) -- Copper fell the most in a month as a rally in the dollar, following an unexpected contraction in U.S. service industries, fueled concern that a near-doubling of prices this year may have been exaggerated.

The dollar rose as much as 0.8 percent against a basket of six major currencies, trimming demand from traders who buy commodities as a hedge against inflation. An index of U.S. non- manufacturing businesses slid to 46.4 in July, an industry report showed yesterday. Copper has risen 95 percent this year on signs that the global recession may be easing.

“Copper is due for a correction,” said Gijsbert Groenewegen, a partner Gold Arrow Capital Management in New York. “Economic productivity has not picked up enough to produce higher demand. Industrial metals will suffer.”

Copper futures for September delivery fell 6 cents, or 2.1 percent, to $2.752 a pound on the New York Mercantile Exchange’s Comex unit. That marks the steepest drop for a most-active contract since July 8 and caps the longest rally since Jan. 2.

The metal had surged 14 percent in the past five sessions, even as some reports signaled the U.S. economy remains weak.

Signs of Weakness

U.S. employers cut 371,000 jobs in July, Automatic Data Processing Inc.’s ADP Employer Services unit reported yesterday. Economists forecast cuts of 350,000 positions, the median of 30 estimates in a Bloomberg News survey. The U.S. has lost 6.5 million jobs since the recession started in December 2007. The Labor Department is set to report July unemployment tomorrow.

The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, fell last month from 47 in June, according to the Tempe, Arizona-based group. A reading of less than 50 indicates a contraction. Economists projected a July reading of 48, the median of 77 estimates in a Bloomberg News survey.

Weaker economic reports “may finally be catching up with metals,” analyst Edward Meir at MF Global Ltd. in Darien, Connecticut, said in a report today. “The depth of the current correction in metals suggests that we could see more selling over the next day or two.”

Copper for delivery in three months fell $175, or 2.8 percent, to $6,025 a metric ton ($2.73 a pound) on the London Metal Exchange.

Among other metals traded on the LME, aluminum, nickel, tin, lead and zinc fell.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aO7qFzQW33QU

GLTA !!