Copper rises as Summers pulls out as Fed chairman candidate

Copper rose on Monday after hitting a five-week low on Friday following Lawrence Summerss withdrawal as a candidate for next Fed chairman. Broad expectations that the Federal Reserve will pare its monetary stimulus after the upcoming two-day FOMC meeting on September 17-18 limited gains.

On the Comex division of the New York Mercantile Exchange, copper futures for delivery in December rose by 0.24% to $3.211 per pound at 9:00 GMT. Prices held in range between days high and low of $3.271 and $3.208 per pound respectively. The industrial metal rose by 0.5% on Friday but still settled the week 1.2% lower after advancing 0.7% in the preceding one.

Copper extended Fridays gains into Monday amid a broadly weaker dollar. The U.S. currency was pressured after Lawrence Summers, Treasury secretary under President Bill Clinton and former top aide to President Barack Obama, withdrew from consideration to succeed current Federal Reserve Chairman Ben Bernanke. This boosted speculation that the end of the program might be deferred as Summers was expected to tighten Fed policy more than his potential opponent Fed Vice Chairman Janet Yellen.

Dollar-denominated commodities tend to trade inversely to the greenback as a weakening of the currency boosts raw materials’ appeal as an alternative investment and makes them cheaper for foreign currency holders. The dollar index, which tracks the greenback’s performance against six major counterparts, fell by 0.40% to 81.35 at 9:03 GMT. The December contract ranged between day’s high of 81.35 and low at 81.19, the weakest level since August 28.

Lin Hui, head of research at Orient Futures Co. in Shanghai: “The metal market was encouraged by Summers’ departure. That gave a strong indication that a possible tapering of quantitative easing would slow with the next Fed leader.”

Gains however remained limited as the Federal Open Market Committee is scheduled to meet on September 17-18 and expectations point at tapering taking place. According to a Bloomberg survey conducted on September 6, the central bank will reduce its monthly purchases of Treasuries to $35 billion from $45 billion and keep mortgage-bond buying unchanged at $40 billion.