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Copper Falls to Seven-Month Low as Dollar Rallies, Oil Slumps
Contact nowBy Millie Munshi
Sept. 2 (Bloomberg) - Copper tumbled to a seven-month low as the dollar's rally and plunging energy prices curbed demand for commodities as a hedge against inflation.
The dollar rose as much as 0.9 percent against a basket of six major currencies including the euro and yen, heading for a fourth straight gain. Crude oil slid as much as 8.7 percent. Copper has gained 7.6 percent this year on demand for raw materials as alternative assets.
''Weaker energy prices and a stronger dollar are weighing on copper,'' Edward Meir, an analyst at MF Global Ltd. in Darien, Connecticut, said today in a report. ''The wheels seem to be coming off the commodity markets.''
Copper futures for December delivery fell 11.4 cents, or 3.4 percent, to $3.273 a pound on the Comex division of the New York Mercantile Exchange. The price earlier touched $3.159, the lowest for a most-active contract since Jan. 28.
The Reuters/Jefferies CRB Index dropped as much as 4.3 percent, touching the lowest value since Feb. 13. The gauge of 19 raw materials lost 5.9 percent in August, after plunging 10 percent in July. Investors have sold metals, energy and grains as the dollar rebounded from a record low reached against the euro on July 15.
The dollar has ''picked up serious momentum,'' which is ''limiting any interest in commodities,'' said William O'Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey. ''Across the board, it's bad news for commodities.''
Slumping Economy, Demand
Copper also fell on concern that a global economic slump will cut demand for metal used in homes, cars and appliances. Speculation usage will fall has pushed copper down 23 percent from a record $4.2605 set on May 5.
An index of manufacturing in the U.S. fell in August for the first time in three months. The Institute for Supply Management's factory index fell to 49.9 last month from 50.0 in July, the Tempe, Arizona-based group reported today. A reading below 50 indicates a contraction.
Slowing U.S. growth may hurt countries that rely on exports of manufactured goods to power their emerging economies, investor Marc Faber said today in a Bloomberg Television interview from Bangkok. The U.S. is the world's largest economy.
''With the global economy looking weak, you have a situation where it's hard to see any good improvement for copper demand,'' O'Neill said.
On the London Metal Exchange, copper for delivery in three months dropped $45, or 0.6 percent, to $7,260 a ton ($3.29 a pound). The price has declined 2.7 percent in the past 12 months.
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