Comex copper closed with moderate losses on Friday, its direction being dictated primarily by the weaker dollar after a record US current account deficit was reported, but traders said the thin trading conditions accounted for exaggerated moves as locals and speculators were the dominant players.
"It was a pretty quiet day, really subdued. The action this had a lot do with what the dollar was doing. But after the deficit numbers came out a lot of people were surprised the dollar didn't weaken a lot more than it did.
The rallies and the dips that we saw were generated by the locals," said one New York copper dealer.
The dollar fell broadly against other major currencies on Friday, weighed down by a report that showed the US current account gap widened by more than expected in the first quarter.
A weaker dollar supports dollar-denominated copper prices as overseas investors benefit. Active July copper finished 0.65 cent lower at $1.1925 per lb., traded in a range between $1.1820 and $1.2020. Spot June was down 0.80 cent to $1.1950 a lb.
Only contracts out to March 2005 actually traded.
The board settled 0.35 to 0.60 cent lower. Comex estimated final copper volume at a light 13,000 lots after 9,413 lots traded on Thursday. Open interest rose by 1,180 contracts to 63,409 lots on Thursday.
The record US deficit, the broadest measure of the nations global trade, grew to $144.9 billion in the first quarter, exceeding economist's forecasts of a $141.0 billion gap.
The deficit is a reflection of more money being switched out of dollars into other currencies to buy foreign goods and services than is flowing into dollars as other countries buying US exports.
In anticipation of a Federal Reserve interest rate hike, both dollar and copper prices may have overshot the mark, beyond what would be warranted if the Fed implements higher rates. Traders said they think the dollar may have been overbought and copper oversold, hence dollar declines despite the strong economic data and copper purchases even if the data imply higher rates.
Some traders said they expect copper to trade roughly between $1.12 and $1.22 for July futures.