Commodities shrug off dollar, close up

Commodities advanced modestly Wednesday as investors, shifting their focus back to supply and demand concerns, looked past the U.S. dollar's second straight day of gains.

Although the dollar's newfound muscle after weeks of losses had hit commodities markets hard Tuesday, commodities in tight supply and enjoying robust demand saw prices climb, including wheat and soybeans, copper and tin and gasoline.

"Those markets where demand is strong are coming back despite strength in dollar," said Mike Zarembski, senior futures analyst with optionsXpress Inc.

The dollar's weeks of sharp losses against the euro and other currencies had buoyed commodities prices as foreign buyers sought bargains and investors looked for ways to hedge against inflation. As that trend has ebbed slightly, investors refocused on market fundamentals.

Copper prices rose in London and New York as ongoing strikes at mines in Latin America heightened concerns over the potential for short-term supply constraints. Union workers at Southern Copper Corp. mining operations in Peru launched a strike on Tuesday, while an eight-week strike at a Grupo Mexico copper mine has yet to be resolved.

December copper added 5.25 cents to $3.7635 a pound on the New York Mercantile Exchange. The metal gained nearly 2 percent on the London Metal Exchange, where industrial metals rose broadly. Tin and lead each added more than 3 percent.

Precious metals finished the session mixed, as silver notched a slim gain while gold prices fell. December gold shed 60 cents to close at $735.70 an ounce on the Nymex _ a tiny loss given the dollar's continued climb, which on Tuesday sent gold prices down more than $17 an ounce.

December silver rose 2 cents to settle at $13.47 an ounce.

The inverse relationship between commodities _ oil, gold and others _ and the U.S. dollar has been historically tight in recent weeks, said Fimat energy analyst Antoine Halff in a client note. But he added that past data suggest the link may not last, particularly with energy prices, as other factors such as inventory and demand rotate to the forefront.

The euro bought $1.4104 late Wednesday, off its all-time peak above $1.42.

Thursday could bring increased volatility in the currency and commodities markets as investors position themselves ahead of the Labor Department's report on September job creation due Friday. How the job market fared will be key to the view analysts and investors take on the economy's health.

The August jobs report was dismal, as payrolls fell for the first time in four years and bucked expectations for moderate job creation. Any revision to the August numbers, or better-than-expected growth in payrolls, could support the dollar's recovery, said Ashraf Laidi, chief currency analyst with CMC Markets.

Wheat and soybean prices rebounded from early declines. A worldwide supply crunch helped push wheat prices to an all-time high last week _ a bushel cost almost double what it did a year ago _ and the gains have also supported the price of other agriculture products.

December wheat rose 4.5 cents to settle at $9.27 a bushel on the Chicago Board of Trade, while November soybeans rose 7.25 cents to close at $9.51. Both markets continue to see strong export demand.

With a healthy harvest well on its way, the corn market appeared comparatively weak. December corn shed 4.25 cents to close at $3.445 a bushel.

Elsewhere, energy prices ended mixed. Traders sifted through a report on U.S. petroleum inventories that included bearish and bullish elements: The Energy Information Administration reported a surprising rise in crude oil inventories, but gasoline supplies fell unexpectedly over the same period.

Crude stockpiles rose by 1.2 million barrels in the week ended Sept. 28, while gasoline inventories decreased slightly by 100,000 barrels. That compares with analysts' consensus forecast for a draw of 400,000 barrels of crude and a build of 400,000 barrels of gasoline, according to a Dow Jones Newswires survey. Supplies of distillates including diesel fuel and heating oil dropped by 1.2 million barrels versus a projected decline of 400,000 barrels.

Use of refining capacity rose, meanwhile, to 87.5 percent from 86.9 percent a week earlier.

Light, sweet crude for November delivery gave up 11 cents to settle at $79.94 a barrel on the Nymex. Gasoline futures rose 1.31 cents to end at $1.9959 a gallon. Heating oil edged up 1.64 cents to settle at $2.1787 a gallon.