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Copper Takes it on the chin, Drops From 14-Month High as Dollar Rally Curtails Demand

By Millie Munshi

Dec. 4 (Bloomberg) -- Copper fell from the highest price in more than 14 months as a stronger dollar slashed demand from traders who buy commodities as alternative investments.

The U.S. Dollar Index, a gauge of the greenback against six major currencies, gained as much as 1.6 percent after a report showed the U.S. jobless rate fell. A quicker U.S. recovery may let the Federal Reserve raise interest rates next year, analysts said. Copper prices have more than doubled in 2009 as record-low borrowing costs and rising government debt weakened the dollar.

“With the dollar up so big today, it’s hurting all the commodities,” said Lannie Cohen, the president of Capitol Commodity Services Inc. in Indianapolis.

Copper futures for March delivery slipped 0.75 cent, or 0.2 percent, to $3.2375 a pound on the Comex division of the New York Mercantile Exchange, paring the week’s gain to 3.6 percent. Earlier, the most-active contract reached $3.275, the highest price since September 2008.

Employers cut 11,000 jobs last month, government data showed today. Economist estimates ranged from declines of 30,000 to 180,000. The unemployment rate declined unexpectedly to 10 percent from a 26-year high of 10.2 percent in October. The U.S. is the world’s largest metal user after China.

Copper prices rose earlier on anticipation that the global economic recovery will increase demand.

Demand Signal

“People are seeing this jobs number as an uptick in business activity,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Copper is benefiting from the idea that this could bring some additional usage from the industrial sector.”

Most energy prices also reversed gains as the dollar rallied, and Treasury securities fell.

“Everything is moving together because of the dollar right now,” Capitol Commodity’s Cohen said. “That’s the focus.”

On the London Metal Exchange, copper for delivery in three months fell $40, or 0.6 percent, to $7,040 a metric ton ($3.19 a pound). Among other metals traded on the LME, aluminum and tin prices rose, while lead, nickel and zinc declined.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aE7npybq1f1I