LONDON: Copper prices reversed into the red on Wednesday and other metals pared gains after stronger than expected U.S. inflation data dampened expectations for interest rate cuts and sent the dollar surging.
Aluminium earlier hit its highest in 14 months and other industrial metals touched fresh peaks as funds piled into the sector on optimism over the global economy.
But data showed that U.S. consumer prices increased more than expected in March, casting further doubt on whether the Federal Reserve will start cutting interest rates in June.
The data fuelled a jump in the dollar index to the highest since mid-November, making commodities priced in the U.S. currency more expensive for buyers using other currencies.
Copper hits 14-month high with support from momentum funds
Benchmark three-month copper on the London Metal Exchange (LME) slipped 0.4% to $9,378 a metric ton by 1610 GMT, moving away from the 14-month high touched on Tuesday.
LME aluminium edged up 0.1% to $2,463.50 a ton, after earlier touching its highest since Feb. 10 last year.
Investors have been upbeat on metals demand after recent data showing that manufacturing activity expanded for the first time in six months in China and for the first time in 1-1/2 years in the United States.
“That is something that has inserted some optimism in the market, and that has been taken up by hedge funds,” said Carsten Menke, analyst at Julius Baer in Zurich.
“The cyclical swings that are implied by these leading indicators are quite reliable. Given how resilient the U.S. economy has been and also how other parts of the world are faring, there’s well-placed optimism in the market.”
The market, however, was likely to pause in the short term, he added.
“We’re not yet in the phase of a manufacturing boom, so there’s a bit of consolidation warranted for copper,” Menke said.
LME tin gained 2.2% to $31,845 a ton, paring gains after the U.S. data. Earlier it hit its highest in 22 months at $33,130 on the back of stockpiles dropping to their lowest in nine months and speculators covering bearish positions.
In other LME metals, nickel added 1.4% to $18,465 a ton after earlier advancing to its highest in more than five months, zinc gained 1.2% to $2,742.50 after hitting its strongest since April last year at $2,795, while lead rose 0.5% to $2,171 after touching its highest level since Jan. 24.
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