By Millie Munshi and Anna Stablum

March 16 (Bloomberg) -- Copper rose the most in two weeks as the declining dollar spurred demand for commodities.

The U.S. Dollar Index, a six-currency gauge of the greenback’s value, fell as much as 0.6 percent before a U.S. Federal Reserve decision on interest rates. A weaker greenback makes raw materials more appealing as alternative investments. The metal also gained as inventories tallied in London slid.

“The bounce is due mainly to the dollar weakening,” Edward Meir, an MF Global Ltd. analyst in Darien, Connecticut, said today in a report. “But we would remain cautious here, given the other, more compelling issues still out there.”

Copper futures for May delivery gained 5 cents, or 1.5 percent, to $3.365 a pound on the Comex in New York, the biggest gain for a most-active contract since March 2.

Fed policy makers will keep the benchmark interest rate unchanged at a record-low target of zero to 0.25 percent, all 90 economists said in a Bloomberg survey. An announcement of the decision is expected shortly after 2 p.m. today in Washington. Since March 2009, the Fed has said it will keep rates at “exceptionally low” levels for “an extended period.”

“With the market waiting for the Fed tonight, we don’t expect any major fireworks,” said Randy North, an RBC Capital Markets trader in London. Prices will be “heavily influenced” by the dollar, he said.

Copper Inventories

Stockpiles of copper in warehouses monitored by the London Metal Exchange fell for a 10th straight session to 528,050 metric tons, the lowest amount since Jan. 20. On March 2, global inventories tallied by the LME, Comex and Shanghai Futures Exchange touched the highest level since January 2004.

“It’s far too dangerous to take strong bets on the metals right now,” said Gijsbert Groenewegen, a partner at Gold Arrow Capital Management in New York.

Ebullio Capital Management LLP’s commodity hedge fund slumped more than 86 percent last month because of losses in industrial metals. Gains in oil, wheat, gold and sugar last month were “drowned out by the hugely negative impact made by copper, nickel and tin,” according to the U.K. company’s February report to investors.

An index of six industrial metals traded on the LME fell 8.2 percent in January, the biggest drop since the end of 2008, before rebounding 6 percent last month. The index slid 1.8 percent yesterday.

Copper for delivery in three months rose $108, or 1.5 percent to $7,413 a metric ton ($3.37 a pound) at 5:59 p.m. local time on the LME. Nickel, aluminum, lead, tin and zinc also rose.

--With assistance by Chanyaporn Chanjaroen in London. Editors: Ted Bunker, Patrick McKiernan.

To contact the reporter on the story: Anna Stablum in London at astablum@bloomberg.net. Millie Munshi in New York at mmunshi@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.

Related Articles