Comex copper futures bounced back from Tuesdays slippage to 12-day lows on Tuesday to finish higher on Wednesday before a US Federal Reserve decision on interest rates and its effect on the dollar, brokers said.
Active September copper closed at $1.2570 a lb, up 1.55 cents, on the New York Mercantile Exchanges Comex division, after trading from $1.2405 to $1.2580. Spot August also rose 1.55 to $1.2610 and next active December gained 1.50 to $1.2460.
Futures advanced as London copper powered higher due to Chinese buying overnight, triggering short covering by local brokers in New York after the open.
Traders said that dollar weakness also propelled base metals prices higher as before the Feds announcement.
Markets were expecting a quarter-percentage-point increase in the federal funds rate to 1.50 percent to be set by the Federal Open Market Committee by around 2:15 pm EDT (1815 GMT) on Tuesday.
But weak economic data and soaring oil prices left investors questioning the pace and timing of further dollar-boosting rate hikes, trade sources said. "We opened on the weak side as people sold it from the get-go, and, naturally, they got caught short," a floor trader said.
Dealers stayed fixated on the Feds move on rates in the afternoon, players said.
"I guess they'll play it close to the vest today, and maybe some people will try to flatten out their position before the (Fed) number," said a Comex copper floor source. Final estimated volume was 14,000 lots, against on Mondays tally of 19,447 contracts.
Open interest dropped 4,344 lots to 65,847 lots after on Monday's burst of fund long liquidation in the market. The euro rose to a three-week high versus the dollar on Tuesday as traders staked out positions ahead of the FOMC decision.
The euro was last at $1.2298. A softer greenback tends to boost buying in dollar-denominated copper from traders using foreign money. Fundamentally, the picture from the supply side remained uncertain in copper, although daily falls in copper warehouse stocks lent a positive tone to the market, traders said.
London Metal Exchange copper inventories fell 400 tonnes to 82,650 tonnes on Tuesday.
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