Comex copper prices finished on Wednesday with modest gains on a late round of short-cover buying after spending most of the day under water from profit taking, traders said.
"More of the action was toward the end of the day on short covering. That was the crux of the matter. It went down because it was triggering some light stops and people were getting short.
But when the dollar started to soften, everyone was trying to short cover," said one copper dealer. Benchmark December copper on the New York Mercantile Exchange's Comex division closed 0.45 cent higher at $1.3015 a lb, after trading between $1.2650 and $1.3070.
Spot October rose 0.30 cent to $1.3060 a lb.
The rest finished 0.25 to 0.45 cent higher. But traders said the action was light and prices mostly driven by locals. "As thin as it is, everyone was scrambling to buy their shorts back and, the next thing you know, we ended higher on the day.
But it was mostly local action and probably reacted more than actually traded," a dealer said. Comex estimated final copper volume at 17,000 lots, up from Tuesday's turnover of 7,171 lots.
Open interest fell by 1,282 lots on Tuesday to 74,501. Some copper participants remain bullish from the sidelines, citing strong fundamentals like twin labour strikes in Mexico, declining inventories, robust demand and a declining dollar.
One trader said he thought some participants were waiting for December futures to get above on Tuesday's high at $1.3050 and $1.31 per lb. to put on new long positions.
"They want to see the market clear out of this little channel that it's making.
In the meantime, it's just going to go back and forth, tossing like the waves," he added. Copper continued to consolidate the heavy losses from last week when it fell a precipitous 10 percent and settled near one-month lows after a series of factors conspired to unwind a heavily overbought market.
On Wednesday, the dollar fell to new eight-month lows against the euro as technical selling combined with worries about US economic growth and interest rate outlook.
A declining dollar offers overseas investors an advantage on dollar-denominated assets like copper. Though copper found support from a two-pronged strike in Mexico, some players thought the impact had already been accounted for in prices.
Striking workers at Mexico's La Carded facility, owned by world's third largest producer, Group Mexico, dug in for a fight with the company and are working on an appeal in case the government declares the strike illegal.
The labour action came four days into a walk out by colleagues at the company's Cananea mine in Sooner. Group Mexico said operations at La Carded continued and that strikes at both Cananea and La Carded were illegal and therefore should be lifted.
La Carded produces about 140,000 tonnes and Cananea produces some 130,000 tonnes of copper concentrates per year, plus another 50,000 tonnes of copper at its SX-EW plant.
London Metal Exchange three-months copper settled the on Wednesday evening kerb at $2,798 a tonne, down $19 from Tuesday's close. The range extended from $2,754 to $2,822.