METALS-Copper rebounds after Fed statement undercuts dollar
11/02/16 13:00
A worker monitors a process inside the plant at the copper refinery of Codelco Ventanas in Ventanas city
Copper eyes retest of 2016 lows as chart deteriorates-Triland
Copper climbed off its weakest level in a fortnight on Thursday after U.S. Federal Reserve Chair Janet Yellen stressed that U.S. interest rates would rise gradually, sending the dollar lower.
The Fed is unlikely to reverse its plan to raise rates further this year, but tighter credit markets, volatile financial markets, and uncertainty over Chinese economic growth have raised risks to the U.S. economy, Yellen said.
The dollar hit a fresh 15-month low versus the yen after the comments, and fell to its lowest in more than three months against a basket of currencies, offering a reprieve to metals. <.DXY>
A weaker dollar boosts the buying power of those paying for commodities with other currencies, but worsening headwinds for global economic growth and commodities demand suggests actual demand may be hit.
"The level of optimism about the global economy is slowly deteriorating and people are starting to question the recovery in China," said chief investment officer Jonathan Barratt at Ayers Alliance in Sydney.
"But I still believe that regardless of how weak it is, if you are a consumer, these are the areas you start to hedge," he said, suggesting prices may be near their bottom.
Three-month copper on the London Metal Exchange CMCU3 rose 0.2 percent to $4,454 a tonne by 0136 GMT, following a 1.4 percent loss in the previous session when prices hit their weakest since Jan. 26 at $4,430 a tonne.
The Shanghai Futures Exchange was closed for a fourth session due to its Lunar New Year holidays. It will reopen on Monday Feb. 15.
Metals broker Triland said a test of the year's lows looked likely for copper.
"The damage is done on the charts with all key moving averages now above the current price and a market that will struggle to find a decent support unless we re-test the yearly lows again which looks increasingly likely."
Europe's top four economies suffered steeper drops in industrial output during December than any analyst had forecast, a grim sign for the global economy as it struggles to sustain momentum.
China will do more to ease yuan convertibility in free trade zones this year, a top official with the State Administration of Foreign Exchange said on Wednesday.
In news, copper production in the Democratic Republic of Congo dropped for the first time in six years in 2015 and this year could be another tough one, the country's chamber of mines said.
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