MANILA: London copper futures dropped for a third session on Thursday as the dollar stayed near a 13-1/2-year high, pulling the industrial metal further away from its strongest level since June 2015 after a rally that many doubt could be sustained.
The industrial metal has fallen 10 percent since last week's surge that was stoked by expectations of increased U.S. infrastructure spending with Republican Donald Trump's upset election victory.
"It's clear that the strengthening U.S. dollar is one of the issues for commodities generally and copper in particular," said Michael McCarthy, chief market strategist at CMC Markets.
"Although in the short term we could see further pressure on copper, the trend that we've established since the takeoff from those lows suggest that there might be further gains in the medium to longer term."
Three-month copper on the London Metal Exchange was off 0.5 percent at $5,404 a tonne by 0701 GMT. The metal on Nov. 11 touched its highest since June 2015 at $6,025.50.
McCarthy said firm industrial output growth in top copper consumer China should support prices going forward. Market participants also believe that Trump may not push through with his campaign threat to label China a currency manipulator and to slap punitive tariffs on Chinese imports, said McCarthy.
The most-traded January copper contract on the Shanghai Futures Exchange dropped 1.1 percent to close at 43,670 yuan ($6,357) a tonne.
Executives at some of the world's major copper producers and traders said on Wednesday the global copper market will be oversupplied for at least two years, casting doubt on the chances of a prolonged rally in prices.
With China accounting for half of global copper consumption, investors hoping for a splurge in U.S. infrastructure spending by Trump may end up underwhelmed given that the plans, even if successful, would add only modestly to world demand.
Market participants are watching U.S. Federal Reserve Chair Janet Yellen's congressional testimony at 1500 GMT where she might raise concerns about the dollar's surge.
The dollar held near a 13-1/2-year peak versus a basket of major currencies on expectations U.S. interest rates would rise faster due to Trump's plans for an expansionary fiscal policy.
Among underperformers, Shanghai zinc slid 3.6 percent to 20,570 yuan a tonne and aluminium dropped 2.1 percent to 13,430 yuan.
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