Copper gains supported by a softer dollar & Chinese government support for yuan

  • Kedia Advisory
  • Commodities News
Copper gains supported by a softer dollar & Chinese government support for yuan
Credit: © Reuters.

Copper prices experienced a modest uptick, closing up by 0.08% at 717, supported by a softer dollar and Chinese government efforts to bolster the yuan, enhancing purchasing power for the top consumer. The LME market's ample copper supplies led to a cash copper discount over the three-month contract, reaching a record high of $108 per ton this week. 

Despite challenges like weak Chinese demand and a restrained growth outlook in major markets, BMI, a unit of Fitch Solutions, anticipates a slight improvement in copper prices in 2024. BMI's 2024 average forecast is maintained at $8,800/tonne, reflecting factors such as supply constraints and a potential decline in the U.S. dollar strength, especially if the Federal Reserve initiates rate cuts later in the year. Data for December revealed that China's copper cathode output reached 999,400 mt, marking a 3.86% increase from the previous month and a year-on-year surge of 14.87%. However, it fell short of the expected 1.0045 million mt by 5,100 mt. The cumulative output from January to December stood at 11.4401 million mt, reflecting a year-on-year increase of 11.26%, marking the largest annual gain in recent years. 

Technically, the copper market is witnessing short-covering, with a 4.01% decline in open interest, settling at 5968. Prices have edged up by 0.6 rupees. Copper is finding support at 715, and a breach of this level could lead to a test of 712.9. On the upside, resistance is likely at 720.2, and a move above could see prices testing 723.3.

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