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LONDON: Copper prices recovered from a more than two-month low on Wednesday after the dollar weakened, with worries over a likely recession and sliding metals demand capping gains.

Three-month copper on the London Metal Exchange was up 1.3% at $7,451.0 a tonne by 1615 GMT after falling as much as 1.8% to its weakest since July 21.

The dollar earlier hit a fresh two-decade high against a basket of currencies, but eased into the red after the Bank of England stepped in to prop up the gilt market.

A weaker dollar makes greenback-priced metals cheaper for buyers holding other currencies.

Despite copper’s bounce, investors were still wary of the impact on demand of a potential recession.

“The big issue that we’re facing right now that the conviction of central banks to raise rates aggressively is putting a lot of doubt into the strength of the economy,” said Nitesh Shah, commodity strategist at WisdomTree.

“The fear of elevated recession risk is hurting expectations for demand for base metals right now.” Also supporting metals were inventory levels, with most base metals stocks very low in historical terms at a time many smelters are cutting back production. Norwegian aluminium producer Norsk Hydro’s said on Tuesday it would reduce output at two of its local plants.

LME lead was the biggest gainer, surging 5.4% to $1,842.50 a tonne after prices fell to a level that would threaten profitability of secondary smelters and potentially spur shutdowns, a trader said.

The discount of LME cash nickel to the three-month contract climbed to $167 a tonne on Monday, the highest on a closing basis since Nov. 2008, which one trader attributed to expectations of more supply moving into LME warehouses. The discount eased to $135 by Tuesday’s close.

Goldman Sachs slashed price forecasts for nickel this week, saying it expected European nickel demand to tumble around 30% during the rest of 2022 and into 2023.

LME three-month nickel added 0.4% to $21,945 a tonne, aluminium advanced 1% to $2,135.50, zinc climbed 0.9% to $2,888 and tin gained 0.6% to $20,800.

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