Copper May Decline as Dollar Rebounds, Chinese Arbitragers Sell

Sept. 27 （Bloomberg） -- Copper, little changed, may decline for the first time in four days as the dollar rebounded against the euro on renewed concern about Europe’s debt crisis.

Copper for three-month delivery on the London Metal Exchange fell as much as 0.5 percent to $7,902 a metric ton before trading at $7,938 a ton at 12:33 p.m. Singapore time. December-delivery copper on the Shanghai Futures Exchange gained as much as 2.5 percent to 61,300 yuan （$9,149） a ton and ended the morning session at 60,510 yuan, the highest in five months.

“The dollar continues to exert strong influence on the price of commodities,” Li Daijun, an analyst at Jinyou Futures Brokerage Co., said from Fujian. “Longer term, we’re still positive on the outlook for copper as the U.S. once again takes steps to ensure the recovery is on track.”

The dollar strengthened against the euro before Ireland discloses the final expenses of the bailing out of Anglo Irish Bank Corp. this week. The euro, which dropped to $1.3474 from $1.3492 last week, also retreated after Der Spiegel reported the European Commission lacks confidence in the viability of German regional lenders.

Copper may also drop as some investors in China boost arbitrage trading to take advantage of the price gap between Shanghai and London. The metal advanced 3.5 percent in London from Sept. 22 to Sept. 24 while the exchange in Shanghai was closed for the Mid-Autumn Festival holiday.

“Copper in London rallied very strongly during the time that China was out on holiday,” said Li. “With the global economic outlook still in question, investors turn to arbitrage to make some money,” Li said, referring to investors selling the metal in London and buying it in Shanghai. Arbitrage traders profit from disparities in prices of equivalent securities or commodities that are traded on more than one market.

Aluminum in London dropped 0.6 percent to $2,303.50 a ton, zinc declined 1 percent to $2,225.50 a ton and lead fell 0.3 percent to $2,290 a ton. Nickel was little changed at $22,920 a ton, while tin hadn’t traded by 12:58 p.m. in Singapore.