LONDON: Copper was heading for its biggest weekly fall in a month on Friday as the dollar soared to a 14-year high and traders decided a rally driven by US president-elect Donald Trump's economic policies was overdone, for now.
The red metal surged more than 11 percent last week in its biggest such gain since October 2011 as investors bet Trump's plan to hike US infrastructure spending and cut taxes would boost the world's top economy.
Since hitting a 17-month high above $6,000 on Nov 11, however, copper has dropped nearly 10 percent, hurt in the latest instance after Federal Reserve Chair Janet Yellen signalled US interest rates could rise "relatively soon".
"Prices overshot before on hopes for the infrastructure spending. The stronger dollar is also contributing to the fall. Probably (prices) will tread water going forward because positive expectations are already priced in," said Commerzbank analyst Eugen Weinberg.
Three-month copper on the London Metal Exchange was down 0.8 percent at $5,453 a tonne by 1104 GMT, heading for a weekly fall of nearly 2 percent.
Trump's election as US president has done nothing to change the Fed's plans for a rate increase "relatively soon," Yellen said on Thursday, as data suggested the US jobs market is tightening and inflation is gaining traction.
The comments pushed the dollar to its highest since early 2003 against a currency basket on Friday.
A stronger dollar makes dollar-denominated commodities such as copper more costly for holders of other currencies.
Also weighing on copper, China's booming property market showed early signs of a softening in October after a price rally that propped up economic growth this year.
Going forward, indications of a relatively balanced copper market next year could support prices, analysts say.
China's biggest copper smelter, Jiangxi Copper, has agreed to a 5 percent drop in fees to process concentrate for Freeport-McMoRan Inc in 2017, people familiar with the matter said.
Smelting fees tend to fall when ore supply decreases as smelters are forced to offer competitive rates to win business.
"The reduction likely reflects expectations that global mine supply will remain fairly flat next year after growing around 4 percent this year," Commonwealth Bank of Australia analyst Vivek Dhar said in a note. Zinc was steady at $2,533.50 a tonne and nickel slipped 1.2 percent to $11,115.
Sherritt International Corp's joint nickel venture in Cuba will return to profit next year if prices for the metal remain at the current level, the Canadian mining company's head said in an interview.
"It looks like the nickel market ... is moving into deficit, with forecasts of deficit for few years. We are optimistic it will be positive for pricing," Chief Executive David Pathe said.
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