THE price of copper has continued to trade on a downward trend with the commodity hitting six-year lows yesterday on the London Metal Exchange (LME) owing to the appreciating United States dollar and reduced demand for copper by China.
Reuters reports that copper slipped back yesterday towards six-year lows as the dollar rose on heightened expectations that the US Federal Reserve could raise interest rates in September and amid a bearish backdrop for China demand, trading at US$5,194 a tonne.
Three-month copper on the LME slipped by 0.8 percentage point to US$5,194 a tonne by 01:31 GMT, after closing little changed in the previous session, but within reach of Monday’s six-year lows at US$5,142 a tonne.
Reuters quotes Atlanta Federal Reserve president Dennis Lockhart as saying it would take “significant deterioration” in the US economy for him not to support a rate hike in September, lifting the dollar, and eroding purchasing power for buyers with other currencies.
Commodities demand growth is already suffering from slowing factory growth in China as its switch to a service-led economy blunts manufacturing demand and threatens to pin back economic growth to the weakest pace in a quarter of a century.
Commenting on the development, an analyst at Standard Chartered Bank in Shanghai Judy Zhu said, “Sentiment here among Chinese investors is quite bearish at the moment, it’s hard to see any sustainable rebound from here… The economic picture still looks quite soft, while manufacturers’ order books have not improved, especially since it’s the slow summer season.”
On Shanghai Futures Exchange, copper erased early gains of nearly one percent to turn flat at 37,970 yuan (US$6,116) a tonne.
China’s central bank promised to “stabilise financial market expectations” on Tuesday, saying it will head off risks in the latest show of official resolve to keep the economy on an even keel.