Copper prices edged higher on Monday as cooling expectations for a US interest rate hike supported the demand outlook for the industrial metal, offsetting pressure from a stronger dollar.
Benchmark three-month copper on the London Metal Exchange (LME) rose 0.19 per cent to $14,286 a metric tonne, as investors weighed the prospect of a less restrictive US monetary policy against continuing concerns over global demand.
Markets have sharply reduced expectations of an October interest rate increase by the US Federal Reserve following weaker-than-expected US jobs data last week.
According to the CME FedWatch tool, traders are now pricing in an 18 per cent probability of a rate hike at this month’s Federal Open Market Committee meeting, down sharply from 64 per cent a week earlier.
The gains in copper were constrained by renewed strength in the US dollar.
The dollar index, which measures the greenback against six major currencies, climbed 0.53 per cent on Monday to a near 17-month high, helped by weakness in the euro amid renewed concerns over French fiscal conditions.
A stronger dollar generally weighs on dollar-denominated commodities by making them more expensive for buyers using other currencies.
Copper also drew support from declining oil prices, as easing energy costs could reduce inflationary pressure and improve the broader economic outlook for industrial commodities.
Oil prices fell amid expectations of increased supply following rising Middle East crude exports and the release of oil stocks by Group of Seven nations.
Lower energy costs can also reduce input pressures for industrial producers, while easing inflation may give central banks greater room to maintain or reduce borrowing costs.
Elsewhere in the LME complex, aluminium remained under pressure from the stronger dollar.
Aluminium fell 0.19 per cent, putting the metal on course for a sixth consecutive daily decline after earlier touching $3,091.50 a tonne, its lowest level in more than three months.
The metal has fallen more than 18 per cent from its four-year high reached in June, weighed by easing concerns over supply disruptions in the Gulf region and expectations of additional production capacity in Indonesia.
Zinc fell 0.44 per cent, while lead gained 0.3 per cent. Nickel was almost unchanged, easing 0.01 per cent, while tin advanced 0.24 per cent.
