Copper Is Little Changed in N.Y. as Dollar Rebound Curbs Demand

By Millie Munshi

June 30 (Bloomberg) -- Copper was little changed, paring gains, as the dollar's rebound eroded demand for commodities as a hedge against inflation.

The dollar rose as much as 0.4 percent against the euro today, snapping a four-session slump. The Reuters/Jefferies CRB Index of 19 raw materials fell from a record. Copper has gained 28 percent this year as the sagging dollar and soaring energy costs boosted demand for commodities as a store of value.

Copper ``drifted lower as the dollar strengthened,'' said Matthew Zeman, a trader at LaSalle Futures Group in Chicago. ``The copper trade now is based on people using metals and commodities as inflationary hedges.''

Copper futures for September delivery rose 0.45 cent, or 0.1 percent, to $3.8825 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the price fell as much as 1.2 percent.

On the London Metal Exchange, copper for delivery in three months dropped $20, or 0.2 percent, to $8,510 a metric ton ($3.86 a pound). The metal climbed to a record $8,880 a ton on April 17.

Investors may shift away from commodities as an alternative to dollar-denominated assets. The U.S. currency will end a two- year slide and advance in the second half, according to forecasts compiled by Bloomberg.

``We would expect demand for commodities will start to cool,'' Sean Darby, the head of regional strategy for Nomura Holdings Inc., said in an interview on Bloomberg Television. The key to lower raw-material prices will be a ``firmer dollar,'' he said.

Strike in Peru

Earlier, copper reached $3.913, the highest since May 6, as a strike threatened supplies from Peru, the world's third- largest producer of the metal.

The third national strike in less than 14 months started today in Peru as workers at more than a dozen mines walked off the job, said Luis Castillo, the general secretary of the Mining Federation.

``Copper is getting some support from the strike,'' said Frank McGhee, the head metals trader at Integrated Brokerage Services LLC in Chicago. The market is ``tightly supplied,'' he said.

Labor unrest in Latin American countries including Mexico and Chile, the world's biggest copper producer, has reduced output in the past year. The price of the metal has quadrupled in the past five years as mining companies struggled to keep up with increasing demand from China and other emerging economies.

Copper on the Comex climbed 7.7 percent in June and is up 13 percent in the past 12 months.

To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.