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Copper futures erase gains as Cyprus relief rally fades

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Investing.com - Copper futures erased earlier gains to trade modestly lower during European morning hours on Monday, as a relief rally sparked by news Cyprus secured a last-minute bailout faded.

On the Comex division of the New York Mercantile Exchange, copper futures for May delivery traded at USD3.454 a pound during European morning trade, down 0.35% on the day.

New York-traded copper prices rose by as much as 0.6% earlier in the day to hit a session high of USD3.486 a pound, the strongest level since March 21.

Copper prices rose to the session high after European finance ministers approved a EUR10 billion bailout plan for Cyprus just hours before a Monday deadline, easing fears over a collapse of the island's banking sector.

The European Central Bank said last week that it will cut off liquidity to Cypriot banks on Monday if an agreement with the European Union and the International Monetary Fund on a bailout solution is not in place.

Under the bailout deal, the island's second largest bank, Laiki Bank, will be restructured and holders of bank deposits of more than EUR100,000 will be subject to a 30% haircut.

Depositors holding less than EUR100,000 in their bank accounts will be protected from any deposit taxes.

But the subsequent risk rally faded quickly as worries remained that the euro zone faces more challenges.

Ratings agency Moody's warned earlier that Cyprus remains at risk of default despite the bailout deal and that the dire financial situation in the Mediterranean island was credit negative for all sovereign ratings in the euro area.

A stronger dollar was also depressing prices, as the greenback bounced back against the euro and ticked up versus a basket of currencies.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.05% to trade at 82.57, recovering from an earlier loss of as much as 1%.

Copper traders were looking ahead to a speech by Federal Reserve Chairman Ben Bernanke later in the trading day.

Last week, the U.S. central bank announced that it will leave monetary policy unchanged in spite of recent signs that the U.S. recovery is gaining traction.

Elsewhere on the Comex, gold for April delivery dipped 0.1% to trade at USD1,606.55 a troy ounce, while silver for May delivery added 0.2% to trade at USD28.75 a troy ounce.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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