LONDON: Copper prices posted their biggest weekly drop in nearly two months on Friday after the dollar strengthened on speculation the United States will raise interest rates earlier than previously expected.
Three-month copper on the London Metal Exchange (LME) ended up 0.04 percent at $6,838 a tonne. It closed down half a percent on Thursday, when it touched its weakest level since June 20 at $6,734 a tonne.
Copper posted losses of 2 percent for the week, the largest fall since the week ending July 18 when the metal lost 2.39 percent.
Investors have bought dollars before the Federal Reserve's Sept. 16-17 policy review, betting the central bank will signal an earlier rise to interest rates, which would curb cheap liquidity for industry and for commodity investors.
The dollar index is on track to post its ninth straight week of gains, its longest winning streak since 1997. A stronger dollar makes commodities priced in the US unit more expensive for holders of other currencies.
The Fed is facing perhaps its most pivotal meeting of the year. Up for debate are an overhaul of its guidance on interest rates and a plan for exiting its extraordinarily easy monetary policy.
US data out earlier on Friday showed September consumer sentiment rose to its highest in more than a year, August retail sales rose in line with expectations while August import prices recorded their biggest drop in nine months.
"Positive (US) data ... is a positive sign for the industrial metals but at the same it increases the odds of an increase in the interest rate," said Naeem Aslam, chief market analyst at Ava Trade.
Adding to expectations the Fed might raise rates sooner rather than later, the US economy probably grew much faster in the second quarter than previously estimated, according to data on Thursday that showed a big jump in healthcare spending.
"The key driver right now is US interest rate expectations, the Fed and the dollar, which has been making big gains," said analyst Tim Radford at advisor Rivkin in Sydney.
"Next week, if there isn't that hawkish theme, then we could see a strong reversal in the dollar which could lead to some upside in copper," he said.
In top copper consumer China, credit levels appeared to improve in August after an alarming drop in July, but remained below average, adding pressure on policymakers to offer more stimulus measures to meet their 7.5 percent economic growth target for the year.
In industry news, a suspected financing fraud at China's Qingdao Port that surfaced in June involves about 300,000 tonnes of alumina, 20,000 tonnes of copper and as much as 80,000 tonnes of aluminium ingots, the port operator said in a statement.
In other metals, benchmark nickel notched up weekly losses of nearly 6 percent its biggest weekly loss since February 2013 as markets reversed a rally based on prospects of falling supply from the Philippines.
It ended down 0.14 percent at $18,400 a tonne. Aluminium closed at $2,029 a tonne, down 0.54 percent, lead ended at $2,122 a tonne, up 0.19 percent and tin closed at $21,275 a tonne, up 0.95 percent.
Zinc ended at $2,276 a tonne, up 0.49 percent. More refined zinc is likely to be shipped from bonded warehouses in China to warehouses approved by the LME in Asia in the fourth quarter as tight credit crimps domestic demand at a time of increased imports, traders said.
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