Future Copper Prices Jump as Dollar Drops in Three Monts

Future Copper prices rose, rebounding from the biggest drop in three months, as the dollar resumed a slide, enhancing the appeal of commodities as alternative investments.

The greenback fell as much as 1.4 percent against a basket of major currencies. Copper in New York slid 2.5 percent yesterday, the most since July 16, after China, the world?s biggest metal consumer, raised interest rates.

?It looks like the knee-jerk reaction to the China rate hike is over, and the market has had time to absorb the implications,? said Alex Heath, the head of industrial-metal trading at Royal Bank of Canada Europe Ltd. in London. ?The key again will be the dollar.?

Copper futures for December delivery rose 2.65 cents, or 0.7 percent, to $3.784 a pound at 11:37 a.m. on the Comex in New York. Before today, the metal gained 27 percent in the past year.

China unexpectedly raised borrowing costs for the first time since 2007, lifting the benchmark one-year lending rate and the deposit rate by 0.25 percentage point.

The increase ?is being seen as a vote of confidence in the resilience of the Chinese economy and should not derail it or impact levels of base-metal consumption for the longer term,? Heath said.

Copper for delivery in three months rose $47, or 0.6 percent, to $8,307 ($3.77 a pound) a metric ton on the London Metal Exchange. Aluminum, lead, nickel, tin and zinc also gained.[source:bloomberg.com]