Copper Falls, Heads for a Second Weekly Decline as the Dollar Strengthens

Copper fell in New York and London, heading for a second weekly drop as the dollar climbed further on concern about sovereign finances in Europe.

The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, rose for a seventh day, gaining as much as 0.6 percent. The gauge yesterday posted its biggest intraday climb in a month as the European Union said Greece’s 2009 budget deficit was wider than estimated by the government and Moody’s Investors Service cut the country’s credit rating.

“We would not be surprised to see the dollar continue to strengthen in the weeks ahead as attention moves away from Greece to other countries with similarly weak deficit profiles,” analyst Edward Meir at MF Global Inc. said in an e- mailed report today.

Copper for July delivery fell 1.6 cents, or 0.5 percent, to $3.4905 a pound at 8:52 a.m. on the Comex in New York, extending this week’s retreat to 1.3 percent. The metal for delivery in three months slipped 0.3 percent to $7,670 a metric ton on the London Metal Exchange.

The dollar index has advanced 1.2 percent this week, heading for April’s first weekly gain. A stronger dollar makes metals priced in the currency more expensive in terms of other monies.

Chinese Growth

“Dollar strength should deter any meaningful rallies in commodities from setting in over the short term, and instead may increase the odds for a rather sharp break to the downside,” Meir said.

Prices also have retreated this week on concern about efforts by China, the world’s biggest copper consumer, to cool economic growth. Officials ordered developers not to take deposits for sales of uncompleted apartments without proper approval and clamped down on loans for third-home purchases to cool rising prices.

Construction uses a quarter of all the copper produced, according to the Copper Development Association.

“Curbs in China, coupled with weakness in Europe,” may cause copper to drop further, Nick Moore, an analyst at RBS Global Banking & Markets in London, said by phone. “We think we are going to see markedly lower imports” of metal into the Asian nation, he said.

Top Performer

Copper shipments into China rose to a record in 2009’s first half, helping prices to more than double for the year. Prices have gained 4.3 percent in 2010 on the LME, compared with the 44 percent jump for nickel, this year’s top performer among the six main metals traded on the exchange.

Comex prices will average $3.44 a pound ($7,584 a ton) this year before rising to $3.70 next year, Bart Melek, a commodity strategist at BMO Capital Markets, said in a report dated yesterday. He cited “double-digit growth in China, aggressive restocking and a stronger-than-expected recovery in global industrial activity.”

Stockpiles of the metal monitored by the Shanghai Futures Exchange have surged 97 percent this year, and stood at 187,907 tons this week, the highest level since at least 2003.

Copper inventories tracked by the LME were little changed today at 507,150 tons. They fell 0.4 percent this week, the ninth drop in a row. Bookings to remove metal from inventories dropped 2.2 percent to 22,200 tons today.

Zinc for three-month delivery on the LME declined 1.4 percent to $2,385 a ton. Stockpiles in Shanghai warehouses rose to a record 256,334 tons this week. Including LME inventories, stocks are up 21 percent this year.

Nickel slid 1.6 percent to $26,660 a ton and tin gained 0.3 percent to $18,950 a ton. Aluminum fell 0.8 percent to $2,300.50 a ton and lead dropped 1.4 percent to $2,275 a ton.

To contact the reporter on the story: Anna Stablum in London at astablum@bloomberg.net.

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