LONDON: Copper prices rose to their highest in more than a week on Tuesday as a sliding dollar triggered fund buying, though gains were capped by rising inventories and a worsening demand outlook, particularly in top consumer China.
Benchmark copper on the London Metal Exchange (LME) was up 3.1.% at $7,743. a tonne at 1605 GMT in subdued trade owing to Chinese holidays. Prices of the metal viewed by investors as a gauge of economic health earlier touched $7,747, its highest since Sept. 22.
The dollar slipped after data showed US manufacturing expanded at its slowest since May 2020 and US jobs data pointed to a weaker labour market, raising the prospect of less aggressive increases to US interest rates.
A weaker US currency makes dollar-priced metals cheaper for holders of other currencies, potentially boosting demand. This relationship is used by funds to generate buy and sell signals from numerical models.
Overall, though, the dollar is near its strongest in 20 years, which will weigh on demand together with weak consumption as economies slow, driving down copper prices.
“A strong dollar is a clear headwind,” said BNP Paribas analyst David Wilson.
“Demand in China is a particular headwind, due mainly to the property sector. Chinese authorities have introduced measures to stem the decline in the property sector without much affect.” China’s property market troubles worsened in August, with home prices, sales and investment all falling as a mortgage boycott and financial strains on builders further undermined confidence in the sector.
Stocks of copper in LME-approved warehouses are up nearly 35% since Sept. 15 at 136,750 tonnes. That is still low by historical standards, but traders expect further deliveries because of the high premium for cash metal over the three-month contract
Lead prices were boosted on Tuesday by new that Nyrstar’s Port Pirie smelter in Australia will shut for 55 days.