Copper Falls for Third Day on Dollar Rally, China Funding Costs

Copper declined for a third day as the dollar strengthened after a Federal Reserve decision to taper stimulus and funding costs in China surged, curbing the demand outlook for industrial metals.

The contract for delivery in three months on the London Metal Exchange dropped 0.5 percent to $7,231 by 4:49 p.m. in Tokyo, bringing losses this year to 8.7 percent. The price touched $7,307.70 on Dec. 16, the highest level since Oct. 23.

The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major peers, surged to a two-week high after yesterday jumping by the most since Nov. 8 on the Fed’s plans to cut its monthly bond buying to $75 billion from $85 billion. A strong dollar boosts costs for metals buyers in other countries. China’s interest-rate swaps hit a record as the central bank refrained from injecting cash into the financial system.

“The strong dollar after the Fed’s decision put downward pressure on copper,” said Hwang Il Doo, a senior trader at Korea Exchange Bank Futures Co. in Seoul. “There was some selling after the price failed to rise above $7,300.”

China’s seven-day repo rate, a gauge of funding availability in the banking system, extended gains after yesterday jumping the most since a record cash crunch in June. The surge also weighed on the metals market, said Kaname Gokon, deputy manager of research at Okato Shoji Co. in Tokyo. China is the world’s biggest metals consumer.

Copper for delivery in March lost 0.5 percent to close at 51,030 yuan ($8,404) a ton in Shanghai. Futures for delivery in March fell 0.5 percent to $3.304 a pound in New York.

On the LME, nickel rose for a third day as Indonesia, the biggest producer of mined metal, is drawing up a regulation that will lay out details of how a planned ban on mineral-ore shipments will be implemented next month. The cabinet will review the issue today. Zinc, tin and lead slid, while aluminum was little changed.

Before it's here, it's on the Bloomberg Terminal.