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Copper prices are wavering, even as Japan’s manufacturing sector records improved business sentiment. Data from the Bank of Japan indicates heightened confidence among Japan’s manufacturers. Notably, copper prices are finding support from the weak US dollar. Furthermore, the ongoing progress in COVID-19 vaccination has held the red metal prices above the $3.50 psychological level. As at 10.14 GMT, copper prices were trading at $3.53, down by 0.03%.
Japan’s business sentiment improves
Data released by the Bank of Japan (BOJ) on 14th December indicates an improvement in Japan’s business sentiment.
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The Tankan big manufacturing outlook index improved from Q3’s -17 to -8. Experts had forecasted a reading of -11. At the same time, the current quarter’s large manufacturers index is at -10. The number is higher than the expected -15 and the previous -27.
This positive trend has been duplicated by the country’s small manufacturers. The Q4’s Tankan small manufacturers diffusion index improved from Q3’s -38 to -26. The figure beat the analysts’ forecast of -34. Similarly, the small manufacturing index rose past the prior -44 to -27. Analysts had predicted a reading of -36.
Japan is the 3rd largest economy after China and the US. Consequently, investors whose interest is to trade precious metals tend to react to data on the country’s manufacturing sector. In today’s case, the heightened business confidence among Japan’s manufacturers has had a positive impact on copper prices.
BOJ’s data comes a few days prior to the central bank’s meeting on interest rates. According to a survey conducted by Bloomberg, economists expect interest rates to remain unchanged. On 8th December, the Japanese government announced a new $708 billion stimulus package to facilitate economic recovery.
Free-falling dollar supports copper prices
The greenback’s free-fall doesn’t seem to have an end in sight. On Monday, the US dollar index was down by 0.17% to trade at 90.62. Since the beginning of November 2020, the currency has dropped by about 3.97%.
A weaker US dollar is positive news for copper prices. Like most commodities, copper is measured in US dollars. Subsequently, the currency’s current status enables investors to purchase more copper.
Positive vaccine news heightens optimism among investors
Another factor that has supported copper prices is vaccine-induced optimism. After receiving the FDA’s approval last week, shipments of the Pfizer vaccine have begun to arrive in different locations within the US. 145 sites will receive the dose today. An additional 425 and 66 locations will obtain the vaccine on Tuesday and Wednesday respectively.
Similarly, the UK has moved to the second phase of the COVID-19 vaccination after vaccinating the first person on 8th December. General practices in England are set to start offering the vaccine to their patients. The progress has increased investors’ hopes of the pre-pandemic norm.
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