Risk aversion at the beginning of 2015 has left the US dollar on a tear. The US dollar index climbed above 92 and hit a nine year high, dragging the London Metal Exchangecopper to a 4.5-year low. Will the strong momentum in the dollar remain a major drag on copper prices?
“The US dollar is likely to stay strong this year on continued US recovery and expectation for Fed’s interest rate hike, and copper, usually denominated in the dollar, is sure to be weighed on,” said an analyst from Minmetals Futures interviewed by SMM.
However, the analyst noted that it remains possible that copper may, sometimes, be less vulnerable to the dollar. One of the examples is when copper followed crude oil down in late 2014 and became less correlated to the US dollar index and gold prices.
“The strong dollar is certainly among the factors to pressure copper prices, but the influence may be less than some expected.” Analysts from Jinrui Futures and CIFCO both considered the strong dollar an external force. “More fundamentally, the growing copper supply is likely to have the largest impact on prices.”
Zhejiang Yaang Pipe Industry Co., Limited