Copper rebounded from a six-year low as a drop in the dollar boosted the appeal of industrial metals as alternative investments.
The Bloomberg Dollar Spot Index headed for its biggest loss since June after China devalued its currency and concern mounted that the Federal Reserve will delay raising U.S. interest rates. Higher rates curb the appeal of commodities, which don’t pay interest, and tighter monetary policy usually helps boost the greenback. Copper has lost 18 percent in 2015.
“The reaction we are seeing in the metals market is largely currency-driven, and speculation about the Fed’s next move,” David Meger, the director of metal trading at High Ridge Futures LLC in Chicago, said in a telephone interview. “The dollar’s weakness is helping all commodities.”
Copper for delivery in three months rose 1.3 percent to settle at $5,189.50 a metric ton ($2.34 a pound) at 5:53 p.m. on the London Metal Exchange, after falling to $5,062, the lowest since July 2009. Aluminum, lead and zinc also gained in London, while nickel and tin fell.
Traders are pricing in about a 40 percent probability that the Fed raises rates at its September meeting, compared with 54 percent on Aug. 7, based on the assumption that the effective fed funds rate will average 0.375 percent after liftoff.
Commodities tumbled on Tuesday, with an index of the six main metals traded in London dropping 3.1 percent, as the dollar initially rose after China’s surprise change to its currency regime sent shock waves through global markets.
On the Comex in New York, copper futures for September delivery rose 0.8 percent to $2.35 a pound. Earlier, prices slipped to $2.2925.