Forexpros – Copper futures edged modestly higher during European morning trade on Wednesday, as the U.S. dollar weakened ahead of a statement on monetary policy by the Federal Reserve later in the day.
On the Comex division of the New York Mercantile Exchange, copper futures for July delivery traded at USD3.689 a pound during European morning trade, adding 0.23%.
It earlier rose by as much as 0.45% to trade at a session high of USD3.693 a pound.
Market participants were looking ahead to the outcome of the Federal Reserve’s two-day policy-setting meeting later in the day.
While the Fed is expected to reiterate its intent to hold U.S. interest rates near zero through 2014, traders will be seeking clues towards the bank’s attitude on further quantitative easing measures.
Traders are hoping there might be some show of support for a third round of bond purchases to support the U.S. economy.
Previous rounds of asset purchases by the Fed weakened the dollar and sent commodity and equity prices soaring.
The U.S. dollar came under pressure ahead of the release of the statement, with the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, shedding 0.15% to trade at 79.22, the lowest since April 3.
A weaker dollar boosts demand for raw materials as an alternative investment and makes dollar-priced commodities cheaper for holders of other currencies.
However, gains were in kept in check as investors remained wary amid ongoing concerns over risks from politically instability in the euro zone, stemming from France and the Netherlands, and high borrowing costs on the periphery of the region, particularly in Spain.
Europe as a region is second in global demand for the industrial metal. Prices have tracked investor sentiment toward the euro zone’s debt crisis in recent months.
Meanwhile, market participants continued monitor strength of demand from China for the industrial metal. April and May are the peak season for China’s copper consumption, and set the tone for copper demand through the year.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
Concerns over a slowdown in demand from the Asian nation have kept and significant gains in copper prices in check in recent months.
Elsewhere on the Comex, gold for June delivery traded flat at USD1,643.65 a troy ounce, while silver for July delivery eased up 0.15% to trade at USD30.85 a troy ounce.
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