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Dollar Trades Near 3-Month High on Recovery; Copper Advances

Dec. 21 (Bloomberg) – Copper rose and the dollar traded near a three-month high against the euro on signs the global economic recovery is gaining traction.

Copper for delivery in three months on the London Metal Exchange rose 1.3 percent to $6,935 a metric ton at 5:10 p.m. in Tokyo. The dollar traded at $1.4325 per euro in Asia from $1.4338 in New York on Dec. 18 when it reached $1.4262, the strongest since Sept. 4. The yen was at 129.56 per euro from 129.75 last week. The U.S. currency was at 90.44 yen from 90.49 yen in New York. Asian stocks were little changed. The Dow Jones Stoxx 600 Index rose 0.6 percent to 247.81 in London.

Japan’s exports fell at the slowest pace in 14 months in November as demand from Asia supported the nation’s recovery from its worst postwar recession. In the U.S., American consumers probably earned and spent more in November, giving retailers and real-estate agents reason to anticipate business will improve in 2010, economists said before reports this week.

“Global economic recovery prospects are looking brighter as macroeconomic data improves and this is helping to support (copper) prices,” said Zeng Chao, an analyst at Everbright Futures Co. “Trading will be volatile and moves exaggerated in these two weeks, affected by the thin, year-end volumes.”

The dollar traded near a three-month high against the euro as signs that the world’s largest economy is gaining traction and lingering credit concerns in Europe boosted demand for the greenback.

Housing Data

“Further improvement of the U.S. economic data may give an impetus to buy the dollar,” said Toshiya Yamauchi, manager of foreign-exchange margin trading at Ueda Harlow Ltd. in Tokyo. “The sustained recovery may enhance views that the Federal Reserve may bring forward an exit from stimulus measures.”

U.S. household purchases rose 0.7 percent for a second month and incomes climbed 0.5 percent, the most since May, according to the median estimate of 60 economists surveyed by Bloomberg before a Commerce Department report Dec. 23. Combined sales of new and existing homes last month may have reached the highest level since May 2007, other figures due this week may show.

Demand for the euro was limited as the European Central Bank said lenders may have to write down an additional 187 billion euros ($268 billion) as loans to property companies and eastern European nations threaten the financial recovery.

‘Euro Vulnerable’

“With the euro remaining vulnerable to credit problems in the region, the single currency will also explore its downside as people want to close out positions before the Christmas and New Year break,” said Kazumasa Yamaoka, a senior analyst in Tokyo at GCI Capital Co. a foreign-exchange margin-service company.

South Korea’s won and Indonesia’s rupiah led declines among Asian currencies.

The won fell 0.4 percent to 1,180.30 versus the greenback in Seoul, after sliding 1 percent last week, according to data compiled by Bloomberg. The rupiah declined 0.2 percent to 9,525. Standard Chartered Plc forecast the won, which has strengthened 6.6 percent this year, will decline to as low as 1,200 in the first quarter, before rallying to 1,050 by year-end.

“We’ve been looking for a dollar bounce in the first quarter and this seems to be the beginning,” said Thomas Harr, senior currency strategist at Standard Chartered in Singapore. “We’ll still have the global recovery in place, Asia will continue to outperform, and capital inflows will continue to come back into Asia for 2010.”

Inflow Into Korea

Foreign investors, having pumped almost $24 billion into Korean shares this year, sold more of the nation’s equities than they bought for a second day, exchange data show. The Kospi has gained 46 percent this year.

The MSCI Asia Pacific Index fell 0.28 percent to 117.18. Japan’s Nikkei 225 Stock Average rose 0.4 percent. Nippon Oil Corp., Japan’s largest oil refiner, climbed 2.75 percent.

Murchison Metals Ltd., an Australian iron-ore producer, leapt 5 percent to A$2.14 after the cash price for iron ore rose to its highest this year on Dec. 18, according to The Steel Index. Fortescue Metals Group Ltd., Australia’s third-biggest iron ore producer, rose 1.6 percent to A$4.33.

Qantas jumped 5.1 percent as Australia’s biggest airline forecast first-half pretax profit of as much as A$150 million.

AU Optronics Corp., Taiwan’s largest maker of liquid- crystal displays, surged 5.7 percent to NT$37.95 after the China Times reported the company will be allowed to build a factory in China.

The Standard & Poor’s 500 Index advanced 0.6 percent in New York on Friday after better-than-estimated profit at Oracle Corp. and Research In Motion Ltd. boosted technology companies. Futures on the S&P 500 rose 0.1 percent in Asia.

Iraq and Oil

Crude oil traded above $73 a barrel in New York after rising 5 percent last week, the biggest weekly increase in two months. It was little changed at $73.24 a barrel in after-hours electronic trading on the New York Mercantile Exchange.

Iraq said Iran violated their shared border and called on the Islamic republic to withdraw its forces from an Iraqi oil well 280 miles (450 kilometers) south of Baghdad. Oil futures climbed as much as 2.8 percent on Friday. Iranian troops withdrew from the disputed well in the East Maysan field after an armed confrontation, Iraqi government officials said yesterday. Iraq said the Iranian flag was taken down from the well, though Iranian soldiers were still in Iraqi territory.

Gold bullion gained after the confrontation, said Hwang Il Doo, a senior trader with KEB Futures Co. in Seoul., citing “geopolitical risks in the Middle East.”

Gold for immediate delivery rose 0.04 percent to $1,113.77 an ounce, after increasing to as much as $1,119,69.