By Allen Sykora

Of DOW JONES NEWSWIRES

Copper futures are higher early Wednesday in reaction to the recently softer tone in the dollar and the ability of the market to hold chart support.

Around 9 a.m. EDT (1400 GMT), March copper, the nearby contract with scant volume, is up 4.85 cents, or 1.44%, to $3.4055 per pound on the Comex division of the New York Mercantile Exchange. May, which has the most open positions, is up 3.90 cents, or 1.16%, to $3.4055.

The May futures are continuing a technical bounce from chart support at a low of $3.29 Monday that matched the low from March 2, said John Gross, independent metals-industry consultant. The ability of the market to hold twice on pullbacks to the same level, or a double bottom, encouraged some market participants to buy again.

Meanwhile, some of the dollar's weakness from Tuesday, when Standard & Poor's took Greece's debt off of its ratings watch, has continued on Wednesday. Further weakness in the greenback came after the Federal Reserve left interest rates unchanged late Tuesday, the Bank of Japan doubled the size of its fixed-rate repo and employment data improved in the U.K.

A softer dollar supports copper by making the metal less expensive in other currencies. The March dollar index is down 0.085 point to 79.910 and has been as soft as 79.740.

"The market held support and moved higher in part, driven by the short-term weakness in the dollar, and today we have follow-through," Gross said.

A dollar index back below the psychological 80 area is supporting most dollar-based commodities, said Janet Mirasola, managing director of metals at R.J. O'Brien and Associates. There was short covering, or buying to offset positions in which traders previously sold, across the London base-metals complex, pushing three-months copper in London back above $7,500 a metric ton, she said.

"Support from fundamental factors remains sound as the rumblings of logistical problems in Chile [following a massive earthquake last month] persist, and the definite trend reversal as inventories decline confirms the global consumption uptick," she said.

London Metal Exchange copper warehouse inventories have fallen each day this week, declining another 2,475 metric tons Wednesday to 525,575.

Overall, May copper is largely range-bound at the moment between $3.29 and the nearly $3.49 high hit in late February after the Chilean earthquake, Gross said.

-By Allen Sykora, Dow Jones Newswires; 541-318-8765; allen.sykora@dowjones.com