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METALS-Copper rises as dollar falls, US stimulus hopes lend support

Susan Thomas
Monday, 28 Oct 2013 | 7:13 AM ET

* Dollar falls as expectations of tapering shift further into 2014

* CFTC data shows investors add to spec long copper position

* Coming Up: U.S. Industrial output 1315

LONDON, Oct 28 (Reuters) - Copper rose on Monday as the dollar fell on growing confidence the U.S. Federal Reserve will keep its monetary policy loose until next year, but weak U.S data and fears top consumer China may tighten credit kept pressure on industrial metals.

Three-month copper on the London Metal Exchange rose 0.3 percent to $7,207 a tonne by 1032 GMT from a last bid of $7,185 on Friday. It is still well within a $7,000-7,420 range it has held since early August.

"Views are hardening quite clearly to the idea that tapering is a long way off now," BNP Paribas analyst Stephen Briggs said.

BNP had expected tapering to start in March next year, but has now raised the probability that it could be even later than that, Briggs added.

The Fed's rate-setting committee ends a two-day gathering on Wednesday. The chances it will trim its $85 billion monthly bond buying are seen as minimal given the uncertainty created by this month's government shutdown in Washington.

Asset purchases tend to support base metals by eroding the dollar, and by increasing liquidity available to business and commodities investors.

The dollar fell towards a 9-month low against a basket of currencies on Monday. A weaker U.S. currency makes it less expensive for foreign investors to purchase dollar-priced commodities, thus lifting prices.

Orders for a wide range of U.S.-made capital goods plummeted in September and consumer sentiment weakened sharply in October, signs that a budget battle in Washington has held back the economy.

China money rates and policy are also in focus after they shot up last week to their highest levels since June as regulators signalled they are considering mild tightening to rein in rampant inflation in the country's housing market.

Metals imports are commonly used as a way to circumvent the country's strict currency controls, as traders get dollar-based credit to import metals that are then resold on the local market, with the money raised used to invest in higher yielding local assets like real estate. A clamp down on this sector, or on credit, could erode metals demand.

A top Chinese leader has promised "unprecedented" economic and societal reforms at the Communist Party's much anticipated plenum meeting next month, state media reported on Saturday.

Before that, markets will get a reading on China's manufacturing activity, with the official purchasing manufacturer's index on Friday, Nov. 1.

Reflecting an improving view on copper for the week ended Oct. 1, hedge funds and money managers increased their net longs in copper futures and options by 2,549 lots to 7,832, according to the CFTC as it begins to release its postponed reports after the partial U.S. government shutdown.

PRICES

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

Three month LME tin