Copper Locks In Modest Gains On Weak Dollar

NEW YORK (Dow Jones)--A weaker dollar lured buyers to the copper market Tuesday, though the start of a two-day Federal Open Market Committee meeting kept traders cautious.

The thinly traded April-delivery contract settled at $4.3185 per pound, up 1.75 cents, or 0.4% on the Comex division of the New York Mercantile Exchange. The April contract's last trading day is Wednesday.

The most actively traded contract, for May delivery, ended 1.60 cents higher, or 0.4%, at $4.3190 per pound.

The dollar tumbled to a 16-month low against the euro at $1.4653, enhancing the appeal of dollar-denominated copper contracts to buyers using foreign currencies.

The euro was recently at $1.4630, up from $1.4579 late Monday in New York, as currency traders bet the U.S. will maintain its loose monetary policy.

"You've got a weaker dollar supporting copper prices right now, and if it falls further you could see copper run up to the $4.40 level," said Bob Haberkorn, senior market strategist at Lind-Waldock.

But copper's gains were muted as metal traders await the results of the FOMC's meeting, due to end Wednesday. The Federal Reserve's policy setting committee is expected to discuss extending or phasing out its treasury-buying program, commonly known as "QE2." Cutting the monetary stimulus early may stall the economic recovery, while keeping it in place too long can ramp up inflation rates.

"The expectation is that they will finish QE2 but the huge question is whether there will be any continuation of the program," said Dave Meger, director of metals trading at Vision Financial Markets.

Copper is widely used in manufacturing and construction because it easily conducts electricity and does not rust when exposed to water, but demand for the metal falls as economic activity slows.

 
Copper settlements (ranges include electronic and pit trading): 
May $4.3190; up 1.60 cents; Range $4.2515-$4.3415 
Jul $4.3395; up 1.65 cents; Range $4.2725-$4.3620 
 

-By Tatyana Shumsky, Dow Jones Newswires; 212-416-3095; tatyana.shumsky@dowjones.com

(Source: http://online.wsj.com/article/BT-CO-20110426-713467.html)