LONDON: Copper held near two-year highs on Wednesday as the dollar weakened on the prospect of more stimulus from the US Federal Reserve, while factory data in top consumer China cast doubts on prospects for a speedy economic recovery.
Three-month copper on the London Metal Exchange was barely changed at $6,472 a tonne by 1650 GMT. The metal hit a 25-month high of $6,633 on July 13.
"The dollar is very weak recently and this is quite supportive for commodities including copper," said Commerzbank's head of commodity research Eugen Weinberg.
He said that metals had completely recovered from a slump earlier this year, but that optimism over the global economic recovery was already priced in.
A weaker greenback makes dollar-denominated commodities cheaper for non-US firms, a relationship used by funds to generate buy and sell signals.
Investors are looking for clues on how the US central bank will address spikes in coronavirus cases, but markets were pricing in looser monetary policy which is supportive for metals.
Factory activity in top metals consumer China probably grew for the fifth month in July, but at a slower pace, as floods disrupted manufacturing and a resurgence in coronavirus cases around the world threatened to undermine the gradual domestic recovery. On-warrant copper stocks in warehouses registered with the LME have slid 82% since May 13 to around 45,275 tonnes. On Tuesday, they inched up 425 tonnes. Reflecting concerns over immediately available supply, the spread between cash and three-month copper was last at $8 a tonne.
The global miner said it had mined 266,000 tonnes of copper in the first half of 2020, down 5% year-on-year. It expects to produce 475,000-520,000 tonnes this year. LME aluminium lost 0.2% to $1,728 per tonne, zinc rose 2.5% to $2,303, lead was up 0.4% to $1,875, tin slipped 0.2% to $17,960, while nickel added 1.7% to $13,885.
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