February 11, 2016 / 1:57 AM / 4 years ago

METALS-Copper recovers after Fed statement undercuts dollar

* Copper eyes retest of 2016 lows as chart deteriorates - Triland

* Coming up: U.S. initial jobless claims at 1330 GMT (Adds detail; updates prices)

By Melanie Burton

MELBOURNE, Feb 11 (Reuters) - Copper climbed off its weakest level in a fortnight on Thursday after U.S. Federal Reserve Chair Janet Yellen stressed that U.S. interest rates would rise gradually, sending the dollar lower.

The Fed is unlikely to reverse its plan to raise rates further this year, but tighter credit markets, volatile financial markets, and uncertainty over Chinese economic growth have raised risks to the U.S. economy, Yellen said.

The dollar hit a fresh 15-month low versus the yen after the comments, and fell to its lowest in more than three months against a basket of currencies, offering a reprieve to metals.

A weaker dollar boosts the buying power of those paying for commodities with other currencies, but worsening headwinds for global economic growth and commodities demand suggest actual demand may be hit.

“The level of optimism about the global economy is slowly deteriorating and people are starting to question the recovery in China,” said Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney.

“But I still believe that regardless of how weak it is, if you are a consumer, these are the areas you start to hedge,” he said, suggesting prices may be near their bottom.

Three-month copper on the London Metal Exchange rose 0.3 percent to $4,458 a tonne by 0739 GMT, following a 1.4 percent loss in the previous session when prices hit their weakest since Jan. 26 at $4,430 a tonne.

The Shanghai Futures Exchange was closed for a fourth session for Lunar New Year holidays. It will reopen on Monday, Feb. 15.

Metals broker Triland said a test of the year’s lows looked likely for copper.

“The damage is done on the charts with all key moving averages now above the current price and a market that will struggle to find a decent support unless we re-test the yearly lows again which looks increasingly likely.”

Europe’s top four economies suffered steeper drops in industrial output during December than any analyst had forecast, a grim sign for the global economy as it struggles to sustain momentum.

China will do more to ease yuan convertibility in free-trade zones this year, a top official with the State Administration of Foreign Exchange said on Wednesday.

Copper production in the Democratic Republic of Congo dropped for the first time in six years in 2015 and this year could be another tough one, the country’s chamber of mines said.

The drop partly reflects cuts by miners like Glencore . The company reported a 5.7 percent fall in fourth-quarter copper output to 374,700 tonnes on Thursday after it shut down mines to help boost sliding prices.

Global miner Rio Tinto slumped to a net loss for 2015, hit by a rout in commodities, and scrapped its promise to pay a steady or higher dividend annually due to the tough outlook.


Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Most active ShFE nickel

Three month LME tin

Most active ShFE tin (Reporting by Melanie Burton; Editing by Ed Davies and Gopakumar Warrier)

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