The dollar rose as investors backed out of risk positions and prepped themselves for the Federal Reserve's Open Market Committee meeting next week. The central bank is expected to announce an asset-purchasing program – quantitative easing – designed to raise flagging macro-economic demand. The best-case scenario for copper would be a truly massive QE program, which would push down the value of the dollar while (hopefully) priming the economic pump for firmer growth.
On the Chicago Mercantile Exchange, high-grade copper futures for December 2010 delivery lost 4.1 cents to trade at 3.7465 per pound. Longer-term March 2011 futures slipped 4 cents to 3.759 per pound.
In fact, the supply and demand fundamentals underlying "Dr. Copper" suggest that most trading is currently revolving around dollar expectations right now.
"The combination of a potential strike at [the Chilean copper mine] Collahuasi and the launch of copper exchange-traded funds is adding to what is already a bullish outlook for copper," Dan Major, an analyst at RBS Global Banking & Markets in London, told Bloomberg News Friday. "Despite these fundamental factors, dollar strength will likely lead to further copper-price weakness."
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