Metals Partially Recover From Selloff as Yuan Climbs
August 20 2018 - 6:40AM
Dow Jones News
By David Hodari
LONDON--Metals prices continued to recover at the start of the
week, rallying amid a resurgence in the Chinese yuan and as greater
stability in other emerging-market currencies, including the
Turkish lira, eased tensions on the global economy.
The price of copper was up 1.18% at $6,004 a metric ton in
midmorning trade, although remained 2.1% lower on-the-week.
Similarly, gold prices climbed 0.3% to $1,188.33 a troy ounce,
but was still down 0.44% from its level a week ago.
Both metals hit lows not seen in more than 12 months last week,
when spiraling tensions between Washington and Ankara raised fears
about emerging-market contagion at the same time that weak data
pointed to risks to the growth of the Chinese economy.
Those developments saw the U.S. dollar soar against
emerging-market currencies, making dollar-denominated commodities
more expensive for other currency holders. But after Beijing and
Washington raised the possibility of low-level trade talks, those
foreign exchange moves started to reverse Friday.
The Chinese yuan was last up 0.33% versus the dollar, with the
WSJ Dollar Index, which measures the U.S. currency against a basket
of 16 others, last up 0.18%.
"The fact that the Chinese yuan has stopped depreciating and has
been on the up again for the last three days appears to be playing
a role" in base metals' recovery, Commerzbank analysts said in a
note.
But investors expecting copper to sustain its early-week upsurge
are likely to be disappointed in the coming weeks, analysts
say.
"Last week's news of fresh trade talks helped things, but we
were optimistic last time and we know what happened since.
Investors' skin has been hardened to comments from Donald Trump,"
said Geordie Wilkes, analyst at Sucden Financial Research.
While last week's moves highlighted the market's potential for
volatility, lower seasonal trading volumes also played a role, and
the growing market expectation for two more Federal Reserve
interest rate increases in 2018 may sustain the rise in the U.S.
dollar through the second half of the year, Sucden's Mr. Wilkes
said.
Data from CME Group put the chances of a rate increase at the
Fed's next meeting on Sept. 26 at 96%.
Aside from the macroeconomic outlook, bullish forecasts for
copper prices based on supply considerations were dealt a blow at
the end of last week, when workers at BHP Billiton's Chilean
Escondida operation, the world's biggest copper mine, accepted
management's most recent wage offer.
The market had long expected a repeat of last year's 44-day
strike, which buoyed copper prices.
In a week absent of significant Chinese economic data releases,
investors were keeping an eye out for any further trade talk news,
as well as speeches from Federal Reserve board members.
Among other precious metals, silver was down 0.27% at $14.78 a
troy ounce, palladium was up 0.57% at $918.75 a troy ounce and
platinum was up 1.17% at $795.95 a troy ounce.
Among other base metals, zinc was up 0.31% at $2,396 a metric
ton, aluminum was up 2.44% at $2,081.50 a metric ton, tin was up
0.11% at $18,750 a metric ton, nickel was up 0.85% at $13,670 a
metric ton and lead was up 0.9% at $2,018 a metric ton.
Write to David Hodari at David.Hodari@wsj.com
(END) Dow Jones Newswires
August 20, 2018 06:25 ET (10:25 GMT)
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