By Melanie Burton MELBOURNE, Feb 4 : London copper rose for a second day on Thursday to the most in a month as an overnight tumble in the dollar spurred interest in commodities, including oil, that prompted investors shorting the market to close their positions ahead of the Lunar New Year holiday.
The dollar drop also eased concerns of yuan depreciation, at least temporarily, soothing sentiment in Asia and helping China stocks to rebound more than 1 percent.
“I do think there is some emergence of stabilisation in the sector. As a result, we’re starting to see shorts being covered and people repositioning slightly,” said strategist Daniel Hynes of ANZ in Sydney.
“(But) we still feel there’s some downside potential for copper prices in the shorter term.” China’s copper imports surged by 18 percent in December and reached another record high last year. Beijing continues its efforts to stabilise its real estate markets, a major consumer of copper.
A drop in the U.S. currency on Wednesday revived demand for dollar-priced commodities that become cheaper for buyers paying with other currencies.
Three-month copper on the London Metal Exchange rallied by 1 percent to $4,679 a tonne by 0728 GMT, building on a 1.9 percent gain during the previous session. The contract hit an intra-day high of $4,690 a tonne, the most since Jan. 4.
Funds trading copper on the LME raised their net-long position to 12,789 lots last Friday, LME data showed. < LME-CA-MNET > Shanghai Futures Exchange copper rallied 2.2 percent to 36,330 yuan ($5,524) a tonne.
Chinese metal traders and merchants are likely to take longer than usual Lunar New Year holidays this year, betting that spot demand for metals such as copper will stay weak at least in coming few weeks, industry sources said.
Signals in China’s physical copper market have turned negative. Local physical metal prices have sagged against ShFE futures prices suggesting further weakness for the market.
In other metals, Shanghai zinc rose 4 percent with sentiment turning positive due to a surge in China’s refined imports in December and an expected shortfall in mine supply this year.
But some traders said shipments to China, mostly from Australia, were due to a trade house selling down inventories as prolonged low prices force commodity players to conserve working capital.
“There’s nothing in galvanized steel production … to suggest there has been a sudden need to import more metal to meet industrial demand,” said a source based in Singapore at a trading house.