Copper is trading at 328 cents per pound, up 0.5% on the day, as a drop in the US dollar has encouraged traders to buy the metal. The US dollar index, which measures the value of the dollar against a basket of other currencies, is at a six-week low, and this has contributed to the four-week high in copper. Dealers seem to think the Federal Reserve is in no rush to reduce the size of its quantitative easing programme, which is assisting global demand for the commodity while keeping the dollar soft.
Before the recent weakening of the dollar, copper was sliding, as there were concerns about Chinese demand for the red metal. Chinese manufacturing and industrial production remains high, but the People’s Bank of China (PBOC) has needed to make a number of cash injections to improve liquidity in the Chinese interbank market. The PBOC didn’t provide additional liquidity this week, but if the lines of credit start to dry up we could see a decline in copper.