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Copper prices rose on Monday as a stronger Chinese currency, a weaker dollar and buoyant loan data from top consumer China fuelled purchases by traders that use algorithms to generate buy and sell signals.
Benchmark copper CMCU3 on the London Metal Exchange (LME) traded 1.4% higher at $8,359 a metric ton in official rings.Prices of the metal used widely in the power and construction industries touched a three-week low of $8,213 a tonne on Friday.
A weaker U.S. currency makes dollar-denominated commodities cheaper for holders of other currencies, which could boost demand and prices. This relationship is used by algorithmic traders known as high frequency traders (HFTs).
China’s central bank helped to strengthen the yuan against the dollar by setting the daily midpoint guidance with the biggest bias on record, signalling increasing discomfort with the currency’s recent weakness.
“There is an absence of the wider trading community because of macro and growth uncertainty,” said Alastair Munro, base metals strategist at Marex.
“The market at the moment is dominated by HFTs who are primarily focused on yuan. Copper is highly correlated with the yuan. We also had some positive loans data.”
New bank lending in China beat expectations by nearly quadrupling in August from July as the central bank sought to shore up economic growth.
Industrial metals markets will also scrutinise Chinese house price data along with industrial output and urban investment numbers due this week.
On the technical front, copper faces resistance between the 100-day average of $8,415 and he 50-day average of $8,435.
In other metals, aluminium CMAL3 was up 0.5% at $2,194 a ton, zinc CMZN3 gained 0.8% to $2,463, lead CMPB3 rose 0.7% to $2,243, tin CMSN3 advanced 0.6% to $25,725 and nickel CMNI3 climbed 1% at $20,250.