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Copper Futures Climb as Slumping Dollar Spurs Commodity RallyJune 26th, 2008Copper futures gained for the first time this week as the slumping dollar boosted demand for commodities as a hedge against inflation. The U.S. Dollar Index, a measure against the euro, yen and four other major currencies, fell as much as 0.6 percent today after the Federal Reserve left its benchmark lending rate unchanged yesterday. Copper has gained 26 percent this year as lower U.S. borrowing costs spurred a decline in the dollar. The U.S. currency ``failed badly in the aftermath of the Fed decision late yesterday, thus setting up the stage for today's advance'' in copper, Edward Meir, an MF Global Ltd. analyst in Stamford, Connecticut, said in a report. Copper futures for September delivery rose 5.2 cents, or 1.4 percent, to $3.825 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the price touched $3.855, the highest in more than a month. While holding rates steady yesterday, the Fed also signaled officials want to keep their options open on changes in case the credit crisis worsens and the economy deteriorates. The central bank said it will ``act as needed'' to promote both economic expansion and stable prices. Lower borrowing costs generally weaken the dollar, spur inflation and boost demand from traders who hold commodities as a store of value, some analysts say. ``There's increasing uncertainty about inflation and the geopolitical situation,'' said Ron Goodis, the futures-trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. ``The Fed is behind the curve on inflation. All of this just makes people want to own actual, tangible stuff that they can store, sell or barter.'' The Reuters/Jefferies CRB Index of 19 commodities jumped as much as 2.4 percent to a record 463.03. The measure has surged 29 percent this year as corn and crude-oil futures doubled to the highest prices ever. The gauge, up 20 percent since March 31, is heading for its biggest quarterly gain since 1973. On the London Metal Exchange, copper for delivery in three months rose $130, or 1.6 percent, to $8,445 a metric ton ($3.83 a pound). The metal rose to a record $8,880 on April 17. - Millie Munshi in New York at Bloomberg. Click here for your Free Copper Futures Trading eGuide | |