Copper edged higher on the London Metal Exchange, tracking small swings in the U.S. dollar as investors continued to assess the outlook for U.S. monetary policy. The industrial metal trimmed an earlier gain of 0.9% as a Bloomberg gauge of the dollar partially rebounded from a two-week low.
Dollar retreat supports copper
"The dollar retreated following the decline in oil prices and weakening U.S. employment data, which is benefiting copper," said Li Xuezhi, head of research at brokerage Chaos Ternary Futures Co. "But the upsides will remain limited by continued weakness in traditional industries."
Copper and other metals came under pressure in June as the dollar rallied on signals that policymakers would pursue tighter monetary policy. However, bets on rate hikes have been pared back this week after Federal Reserve Chairman Kevin Warsh on Wednesday said price risks are coming down.
Impact of rates and dollar on metals
Higher rates act as a headwind to metals demand by raising borrowing costs for manufacturers, while a strong dollar makes commodities like copper more expensive for buyers using other currencies.
Copper was 0.3% higher at US$13,364 a ton on the LME as of 1:07 p.m. local time. Aluminum traded little changed at US$3,089.50 a ton, having dropped back to pre-war levels on expectations of returning supplies from the Middle East. More vessels have been transiting the Strait of Hormuz since the U.S. and Iran struck an interim peace deal last month, paving the way for smelters in the region to start ramping up operations. Tin jumped 2.1%.
