copper trades near record high

http://www.bloomberg.com/apps/news?pid=20601009&sid=aHaHNfh9JFzs&refer=commodities

Copper Trades Near Record High on U.S. Rates, Dollar Outlook

By Glenys Sim

April 7 (Bloomberg) -- Copper rose in Asia to just $100 below its record, as investors expected the Federal Reserve to lower borrowing costs this month, weakening the dollar and increasing the appeal of commodities as a haven.

A government report on April 4 showed the U.S. lost jobs for a third straight month in March, increasing concern the economy is falling into a recession. The U.S. Dollar Index, a weighted measure against six major currencies, gained 0.3 percent today after falling for the past three days.

``This data has increased the probability of more aggressive interest rate cuts by the U.S. Fed, something that should keep the U.S. dollar under pressure,'' said Johannesburg-based Walter de Wet, head of commodity research at Standard Bank Group Ltd.

Copper for delivery in three months on the London Metal Exchange rose as much as 0.6 percent to $8,720 a metric ton, and traded at $8,700 a ton at 11:14 a.m. in Singapore. The metal reached a record $8,820 a ton on March 6.

June-delivery copper on the Shanghai Futures Exchange climbed 790 yuan, or 1.2 percent, to 66,930 yuan ($9,558) a ton at 11:29 a.m. local time.

``The red metal continues to find further support from supply problems in Chile,'' de Wet wrote in a report e-mailed today. Chile, the world's largest copper supplier, may have to ration energy depending on the amount of rainfall and whether utilities take generators offline, Chilean Energy Minister Marcelo Tokman said April 4.

`Steep Backwardation'

``Copper is still the only base metal in steep backwardation,'' de Wet said.

Backwardation occurs when nearby contracts are more expensive than longer-dated ones, indicating less copper may be available. The spread between the contract for immediate delivery and the benchmark three-month contract widened 20 percent to $139 on April 4.

Copper gained alongside gold and oil as a weaker dollar boosted raw materials prices as it makes dollar-denominated commodities cheaper for holders of other currencies.

Among other LME-traded metals, aluminum was up 0.4 percent at $2,965 a ton and zinc climbed 0.9 percent to $2,385 a ton. Lead, nickel and tin didn't trade as of 11:36 a.m. in Singapore.

To contact the reporter for this story: Glenys Sim in Singapore at [email protected]

Last Updated: April 6, 2008 23:41 EDT