SINGAPORE: London copper recovered from two-week lows on Tuesday after comments by the US Federal Reserve chief suggested the central bank could maintain its monetary easing policy, eroding the dollar.
The dollar languished at 11-month lows against the euro after Federal Reserve Chairman Ben Bernanke urged US lawmakers to lift the country's borrowing limit to avoid a potentially disastrous debt default.
A weaker greenback makes dollar-priced commodities more attractive for buyers holding other currencies.
The recovery was also backed by an improving economic outlook in the two top consumers of metals, China and the United States, said Henry Liu, head of commodity research at Mirae Asset Securities in Hong Kong.
"From a fundamental perspective we should be more optimistic," he said.
"The US economy is rebounding... local governments in China are still trying to put some money into infrastructure so we are still going to see some mild rebound, and we are still positive for the copper price for the remainder of the year," he added.
Mirae Asset Management said copper prices could find strong resistance in the first half at $8,500 a tonne.
Three-month copper on the London Metal Exchange climbed 0.31 percent to $8,024.50 a tonne by 0320 GMT, reversing losses from the previous session when it fell to its lowest in two weeks at $7,990.25 a tonne.
Copper prices hit a two-and-a-half-month high of $8,256.50 in early January but have since struggled to find traction due to worries about global economic health, and the US borrowing limit, or debt ceiling, in particular.
President Barack Obama on Monday rejected any negotiations with Republicans over raising the US borrowing limit, accusing his opponents of trying to extract a ransom for not ruining the economy in the latest fiscal fight.
The most-traded April copper contract on the Shanghai Futures Exchange fell 0.60 percent to 58,170 yuan ($9,400) a tonne.
China is the world's top copper consumer, accounting for around 40 percent of refined demand last year, with demand growth expected to recover slowly this year.
Still, most users of refined copper in China will hold off on spot purchases until March, despite brighter prospects for consumption, preferring to wait until factories re-open after Lunar New Year celebrations.
"We think commodity prices are likely to rise further in the coming days. This week's release of Chinese GDP and industrial production data are key event risks due on Friday," said Credit Suisse in a note.
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