(Bloomberg) -- Copper posted the biggest rally in almost two weeks after the U.S. dollar weakened on speculation the Federal Reserve will be slow to raise interest rates, boosting demand for commodities as an alternative investment.
The Bloomberg Dollar Spot Index fell for a second day. Odds of the Fed raising interest rates in 2016 remain below 50 percent amid evidence of faltering growth elsewhere. In the U.S., the largest copper user behind China, mortgage applications rose in the week ended Aug. 5 for the first time since July 8. Construction accounts for about 30 percent of global copper demand, according to Wood Mackenzie Ltd.
“Speculation the Fed may hold with the interest-rate hikes has brought the heat down for the dollar index today and hence we are experiencing these gains,” Naeem Aslam, a London-based chief market analyst at Think Markets U.K. Ltd., said by e-mail.
Copper for delivery in three months advanced 0.9 percent to settle at $4,821 a metric ton ($2.19 a pound) at 5:52 p.m. on the London Metal Exchange, marking the biggest gain since July 28. On the Comex in New York, copper futures rose 1 percent to $2.171 a pound.
Ample Supplies
While a weaker dollar and the increase in mortgage application in the U.S. are helping support copper, futures on the Comex will struggle to rise above $2.20 a pound as supply remains ample, Bob Haberkorn, a senior market strategist at RJO Futures in Chicago, said in an e-mail.
Investors are awaiting economic data this week from the U.S. and China for more clues on global demand. The U.S. publishes jobless claims figures on Thursday, while data from China this Friday include fixed-asset investment and industrial output for July.
In other metals news:
- Zinc rose to the highest since May 2015, while aluminum, nickel, lead and tin also gained.
--With assistance from Martin Ritchie To contact the reporters on this story: Agnieszka de Sousa in London at atroszkiewic@bloomberg.net, Luzi Ann Javier in New York at ljavier@bloomberg.net. To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Steven Frank, James Attwood
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