London copper futures ended 2.2 percent up at the London Metal Exchange on Wednesday as the dollar slipped on expectations for more aggressive US rate cuts than previously seen. A weaker dollar often increases appetite for metals as they become cheaper for investors holding other currencies.
Copper for delivery in three months on the LME, often considered a key gauge of real economic activity, was at $8,730 per tonne in the final open outcry session, up $190 from Tuesday's close.
"It's all down to the dollar. After seeing the Fed minutes, and now the IMF comments, the market revaluates just how low US interest rates will have to go," said David Thurtell, metals analyst at BNP Paribas.
Copper, which on March 6 hit an lifetime high of $8,820, is up near 30 percent year-to-date. Investors digested dovish comments, pointing to continued US economic weakness, in minutes released on Tuesday from the US Federal Reserve's latest monetary policy meeting.
Also, the IMF on Wednesday cut its growth forecasts for the United States and said the country would tip into recession this year. A slowdown in the United States puts increasing pressure on the US currency which eased broadly on Wednesday.
Gloomy US equities markets also weighed on the dollar which traded at $1.5801 to the euro at 1605 GMT versus $1.5780 late in New York on Tuesday. Interest rate announcements and statements from the European Central Bank and the Bank of England on Thursday may give more direction to currencies, whose movements often dictate the direction of metals.
The ECB is expected to leave its key rate unchanged while BoE could ease its monetary policy. Shares in BHP Billiton shares rose 2.4 percent after The Australian newspaper reported China was planning to buy a stake of more than 9 percent in the mining giant, interfering in BHP's proposed acquisition of rival Rio Tinto Ltd. Reports of deflated Chinese buying dampened sentiment, while LME inventories rose by 525 tonnes to 115,575, equivalent to just over two days of global consumption.
A copper conference is being held in Santiago, Chile, this week and supply concerns and wavering demand from China are hot topics. Tight inventories and uncertainty in producer nations - with looming power shortages and industrial action - are underpinning prices.
Three-months aluminium rose $112 to $3,100 and nickel $475 to $29,350. Lead rose $63 to $2,958 and tin was at $20,650/20,700 versus $20,400/20,450. Zinc rose $22 to $2,372.
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