Copper prices softened on Thursday on a stronger U.S. dollar as the world’s largest economy grew at a faster pace than expected in the fourth quarter last year.
Three-month copper on the London Metal Exchange (LME) lost 0.2% to USD 8,546 a metric ton as at 1544 GMT, after touching its strongest since Jan. 2 at USD 8,599. It also hit a three-week high on Wednesday with the largest daily trading volumes since Sept. 21.
Earlier gains are reversed after latest data showed expansion of U.S. economy largely shrugged off dire predictions of a recession. It sent support to the dollar which are already at a six-week high.
A stronger dollar makes greenback-priced metals costlier, and will limit the purchasing power for holders of other currencies
Top metals consumer China’s central bank announced a deep cut in the amount of cash banks hold as reserves – a move that will inject about USD 140 billion of cash into the banking system.
Metals prices could still find support by Chinese policy after a seasonal lull, SP Angel analyst John Meyer said.
“The surprise 50 basis point reserve ratio cut in China has seen buyers step into an illiquid market on expectations of a revival in construction activity,” he added.
Copper in particular are also being supported by recent mining disruptions, with several major banks and research groups revising their balance outlooks from surplus to deficit. LME aluminium rose by 0.4% to USD 2,237 a ton, nickel dropped 0.1% to USD 16,630, while zinc dropped 0.2% to USD 2,580.5 and tin advanced 0.4% to USD 26,615. Lead lost 1.3% down at USD 2,134.5.
