LONDON: Copper prices hit their highest in two months and aluminium the highest in three on Thursday after the long-awaited interest rate cut by the US Federal Reserve weakened the dollar and gave support to growth-dependent metals.
Three-month copper on the London Metal Exchange rose 1.4% to $9,533 per metric ton in official open-outcry trading after hitting $9,586.5, its highest since July 18, and stumbling upon resistance from the 100-day moving average.
The US currency fell, making dollar-priced metals more attractive for buyers using other currencies, as the Fed kicked off its monetary easing cycle on Wednesday with a larger-than-usual half percentage point reduction.
“There is a lot of debate on how to interpret the size of this rate cut because one can see it in two ways,” said Dan Smith, head of research at Amalgamated Metal Trading.
“You can argue that it’s good news. On the other way, you can argue that the Fed felt the need to act quickly to support the economy and that this signals that some weakness we are not yet aware of is coming. For now, the bullish interpretation is winning (for copper).” He also said some algorithmic computer models that place buy and sell orders largely on momentum signals had switched to bullish mode. Leading metals consumer China’s economy, however, continues to send mixed signals for copper, used in power and construction, as the country’s construction sector struggles, although demand from its electrical sector is rising.
China’s yuan closed near a 16-month high vs the dollar on Thursday, on hopes that the Fed’s easing offered Beijing leeway on its own monetary policy. With seasonal restocking activity ahead of China’s October Golden Week holiday, the Yangshan copper import premium reached $67, the highest since the start of 2024. It was at a discount in July.
LME aluminium was steady at $2,536 a ton in official activity after hitting $2,569, its highest since June 13. Zinc increased 1.5% to $2,929, nickel rose 0.7% to $16,350, lead climbed 1.6% to $2,070 and tin moved 1.3% higher to $32,000.