Copper ticks up as Fed rate hike bets cool

SINGAPORE: Copper nudged up on Monday, supported by an improving demand outlook after cooling interest rate expectations outweighed pressure from a strong dollar.

Benchmark three-month copper on the London Metal Exchange was up 0.19% at $14,286 a metric ton by 0300 GMT.

The market is weighing diminishing odds of an October US Federal Reserve interest rate hike after weaker-than-expected US jobs data last week tempered expectations that the central bank would raise rates to combat inflationary pressures.

Rate traders are now pricing in an 18% chance of a rate hike at this month’s Fed meeting, down from 64% a week ago, according to the CME’s FedWatch tool.

Higher interest rates can dampen economic activity and weigh on demand for growth-dependent industrial metals like copper.

Meanwhile, the US dollar rose on Monday to a near 17-month high, boosted by a weak euro.

The dollar index, which measures the currency against six major units, was up 0.53%.

A stronger dollar can weigh on commodities denominated in the currency by making them more expensive for buyers using other currencies. Copper also benefited as oil prices fell.

Higher energy prices have contributed to inflationary pressures and weighed on copper prices.

Rising Middle East crude exports and a release of oil stocks by the Group of Seven nations boosted supplies.

Elsewhere, aluminium also fell under pressure from the stronger dollar and declined 0.19% to place it on track to fall for a sixth consecutive day. Earlier, it hit $3,091.5 a ton, its lowest in over three months.

Aluminium prices are down more than 18% since hitting a four-year high in June weighed by easing worries about supply from the Gulf region and expectations of new production capacity in Indonesia.

Among LME metals, zinc lost 0.44%, lead added 0.3%, nickel was little changed, down only 0.01% and tin added 0.24%.

The Shanghai Futures Exchange (SHFE) was closed for China’s National Day and will reopen on October 8.