Forexpros – Copper futures pared losses on Monday, pulling back from a 14-month low as market sentiment was lifted by speculation about a possible interest rate cut by the European Central Bank.
On the Comex division of the New York Mercantile Exchange, copper futures for December delivery traded at USD3.279 a pound during European morning trade, dropping 1.15%.
It earlier tumbled by as much as 6.9% to trade at USD3.072 a pound, the lowest price since July 22, 2010.
Risk appetite improved amid speculation that the ECB may cut interest rates to boost the region’s economy, after governing council member Ewald Nowotny said that the possibility of interest rate cuts should not be ruled out.
“The ECB never pre-commits, and rate cuts cannot be excluded. It all depends on the developments ahead,” Nowotny said earlier.
The comments helped lift the single currency against the U.S. dollar, while the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.25% to trade at 78.72, reversing an earlier gain of as much as 0.6%.
A weaker dollar boosts demand for raw materials as an alternative investment and makes dollar-priced commodities cheaper for holders of other currencies.
Copper futures were down sharply earlier as concerns over the outlook for global economic growth weighed on demand expectations for the industrial metal.
A margin hike by the CME Group, operator of the Comex also weighed, as it raises the amount of cash that traders must deposit for speculative positions.
After markets closed Friday, the CME increased the initial margin on copper contracts by 18% to USD6,750, effective as of the close of trading on Monday.
Elsewhere on the Comex, gold for October delivery pared earlier losses, easing down 0.16% to trade at USD1,636.15 a troy ounce, while silver for December delivery fell 3.13% to trade at a 10-month low of USD29.18 a troy ounce.
The CME increased the initial margin on gold contracts by 21% to USD11,475 per 100-ounce contract from USD9,450, while margins on silver contracts rose 16% to USD24,875 per 5,000-ounce contract.
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