By Claudia Carpenter

Jan. 27 (Bloomberg) -- Copper rose for a second day in New York on speculation U.S. interest rates near zero will buoy demand for industrial metals.

The Federal Reserve kept its benchmark rate close to zero yesterday even after the biggest jump in U.S. new-home sales since 1992. The Fed maintained a pledge to hold borrowing costs “exceptionally low” for an “extended period.” Copper has declined 2.7 percent this year on speculation higher rates would stall growth in the world’s largest economy.

“The worry had been that growth in the U.S. would lead to a move to higher interest rates by the Fed,” said Daniel Brebner, an analyst at Deutsche Bank AG in London. “That opinion seems to be changing modestly with the Fed comments.”

Copper for March delivery advanced 6.25 cents, or 1.5 percent, to $4.3295 a pound at 8:31 a.m. on the Comex in New York.

Prices held gains after Standard & Poor’s cut Japan’s sovereign credit rating for the first time since 2002 because of the country’s $11 trillion debt burden. The nation was the world’s fifth-biggest copper consumer in 2009. Bank of Japan officials voted this week to hold the key interest rate between zero and 0.1 percent.

“My sense is that the market knows the problems with Japan,” Brebner said. “A continuation of easy monetary policy is likely supporting metals markets.”

Jobless Claims

The pace of recovery is “insufficient to bring about a significant improvement in labor market conditions,” the Fed said in a statement. Initial U.S. jobless claims were 454,000 in the week ended Jan. 22 compared with 403,000 a week earlier, the U.S. Labor Department said.

U.S. durable-goods orders dropped 1.3 percent, the Commerce Department said at the same time.

Tin for three-month delivery on the London Metal Exchange rose 1.7 percent to a record 29,100 a ton. The metal is up 8.2 percent this year after jumping 59 percent in 2010. PT Timah, the world’s biggest supplier, said this month its production may drop for a fourth year in 2011.

Aluminum, copper, nickel and lead gained on the LME, while zinc declined.

--Editors: Dan Weeks, Nicholas Larkin.

To contact the reporter on this story: Claudia Carpenter in London at [email protected]

To contact the editor responsible for this story: Claudia Carpenter at [email protected]

Source: http://www.businessweek.com/news/2011-01-27/copper-rises-as-near-zero-u-s-interest-rates-may-buoy-demand.html