MELBOURNE: London copper eased on Wednesday from four-week highs as the dollar rose ahead of key decisions by the Japanese and U.S. central banks, but expectations of a pick-up in demand from China underpinned prices.
The Bank of Japan is expected on Wednesday to make negative interest rates the centrepiece of a new policy framework - widely seen as a desperate attempt to show it still has the means to fight chronic stagnation.
The U.S. Federal Reserve is expected to leave its benchmark overnight interest rate unchanged following its two-day meeting on Wednesday.
But as indicators improve from the world's top metals user, China, it appears more likely that January marked a floor for prices, Macquarie said in a report.
"The latest data points confirm that Chinese construction activity remains in a positive trend, while we are in a nascent global industrial production recovery," Macquarie said.
"We continue to increase our 12-month forward demand outlook across industrial metals as the Chinese government prolongs its more commodity-intensive phase of growth, something we expect to persist through the next political transition in 2017."
Three-month copper on the London Metal Exchange had slipped half-a-percent to $4,786 a tonne by 0125 GMT, paring small gains from the previous session. Prices on Tuesday hit their highest since Aug. 22 at $4,800 a tonne.
Shanghai Futures Exchange copper was flat at 37,270 yuan ($5,586) a tonne.
The U.S. central bank could again cut its forecasts for how high interest rates will need to go in an economy where output, productivity and inflation are growing at a slower pace than in past decades.
ShFE lead and zinc were also up around 1 percent after gains in the overnight session.
Supporting copper, the global world refined market showed an 83,000-tonne deficit in June, compared with a 69,000-tonne deficit in May, the International Copper Study Group (ICSG) said.
LME nickel sagged by 1.2 percent to $10,190 a tonne, paring this week's gains to 4.7 percent. That climb had been fuelled by prospects of a widespread suspension of Philippine mines on environmental grounds.
"We have seen some technical short-covering as the market had got itself a little short by the end of last week on the basis of a worsening technical picture," said Triland in a note.
Meanwhile, BHP Billiton said it disagreed with Australian tax collectors' assessment that the miner needed to pay $766 million in back taxes and charges for its Singapore commodities marketing hub.
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