Copper prices experienced a notable surge on Monday, driven by several key factors. Firstly, the Chinese yuan strengthened, while simultaneously, the U.S. dollar weakened.
Additionally, a positive development emerged in the form of unexpected loan data in China, capturing the attention of algorithm-driven traders in the copper market.
When the U.S. dollar loses value, commodities like copper, priced in dollars, become more affordable for those using alternative currencies. This affordability often triggers increased demand for copper, subsequently driving its price upwards. High-frequency traders, who operate on rapid algorithmic trading, closely monitor such currency dynamics.
China’s central bank orchestrated measures to bolster the yuan against the dollar—a move that infrequently occurs. This action underscores China’s concern about the weakening state of its currency.
However, the prevailing uncertainty surrounding the broader economic landscape has left many conventional traders relatively inactive. Consequently, high-frequency traders employing algorithms have assumed a dominant role in influencing copper market dynamics.
Furthermore, the positive revelation regarding loans issued in China during August exceeded market expectations. The surge in loan issuance is considered a deliberate effort to stimulate economic growth.
The watchful eyes of industrial metal observers, particularly copper, are now trained on forthcoming news from China, encompassing housing prices and factory production volumes. These indicators serve as vital barometers of economic conditions.