Dollar drop eases pressure on metals

SYDNEY: Metals edged higher on Thursday as the dollar weakened against an index of currencies on year-end positioning and partly due to risk-aversion triggered by steep losses in oil.

"All these extreme moves in the oil markets have repercussions on sentiment in other asset classes.

But generally metals have held up extremely well," said analyst Mark Keenan of Societe Generale in Singapore.

"A lot of that is because metals discounted the Chinese slowdown quite early on relative to other commodities.

Now with the exception of copper they are supported by their cost curves and declining inventories. Next year, the zinc, nickel, (and) lead cluster are seen to have some upside."

Three-month copper on the London Metal Exchange had firmed 0.4 percent at $6,437.50 a tonne by 0302 GMT, after falling 1 percent in the previous session.

The most-traded February copper contract on the Shanghai Futures Exchange traded flat at 46,230 yuan ($7,488) a tonne.

The dollar remained on the back foot, having fallen for a third session against the yen as the market unwound stretched positions to lock in profits with just one full week of activity left this year.

Dollar weakness lifted LME nickel, zinc and tin and lead by around half a percent. A weaker dollar raises the buying power of holders of other currencies.

ShFE zinc fell nearly 1.3 percent in part as tight credit in China has curbed consumer buying.

Oil prices tumbled as much as 5 percent on Wednesday, pushing US crude to five-year lows near $60 a barrel after data showed a spike in US inventories and Saudi Arabia's oil minister reiterated that he has no plans to cut output.

The Federal Reserve is likely to raise US interest rates in the second quarter of next year, even as falling energy prices dampen domestic inflation pressures, a Reuters survey found.

Elsewhere, a strike at Peru's biggest copper and zinc mine Antamina is affecting "some" operations at the project, a union director said on Wednesday, although a mine spokesman said operations were "normal". Meanwhile, global aluminium premiums are expected to reach fresh record highs by mid-2015 on a supply deficit in the United States and Europe.