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LONDON: Aluminium prices rose through key resistance levels on Monday, supported by lower inventory, a weaker dollar and expectations the U.S. Federal Reserve will this week announce a bigger rate cut.

Three-month aluminium on the London Metal Exchange (LME) was up 1.8% at $2,515 a metric ton by 0943 GMT, the highest since Aug. 28.

On a technical level, the light metal, widely used in auto-making and packaging, was still strong after a 5.2% rally last week, a trader said.

It broke through the 100-day moving average of $2,480 earlier in the session to create further upward momentum. It had already surpassed the 21-day, 50-day and 200-day averages.

A large futures position also remained on the LME to buy aluminium in October and sell in November. The premium, or backwardation, rose to about $15 a ton for the October contract over November.

Prices have been boosted by a shrinking aluminium supply that has fallen to its lowest in 18 weeks. The inventory in LME’s registered warehouses dropped to 820,850 tons, having fallen 18% over the last three months.

Copper hits two-week high on weak dollar and China stimulus hopes

Among macro factors, the dollar weakened on Monday in anticipation the U.S. central bank will opt for a larger 50 basis point cut.

Lower interest rates could pressure the U.S. currency and make dollar-priced metals cheaper for holders of other currencies.

Markets in China, the biggest aluminium consumer, are closed until Wednesday for a public holiday.

Weekend data showed industrial output growth in China slowed to a five-month low in August, while retail sales and new home prices weakened further.

For other metals, LME copper fell 0.1% to $9,298 a ton, lead was flat at $2,044.50, tin ticked up 0.1% at $31,825 and nickel rose 1% to $16,110, LME zinc was up 0.4% at $2,916.

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