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Copper firms on weak dollar and hope for slower rate hikes

Copper prices drifted higher on Thursday, buoyed by a weaker dollar, optimism that the pace of U.S. interest rate hikes will slow and further support for China’s troubled property sector.

Three-month copper CMCU3 on the London Metal Exchange (LME) gained 0.4% to $8,040 a tonne by 1045 GMT.

LME copper has shed about 6% since touching a five-month high on Nov. 14, mainly owing to fears about burgeoning COVID-19 cases in top metals consumer China.

However, the market received a boost late on Wednesday when U.S. Federal Reserve minutes showed that most policymakers agreed it would “likely soon be appropriate” to slow the pace of increases to interest rates.

“A corner has been turned, so all those fears of recession risk are receding. The Fed minutes seemed to cement that pivot,” said WisdomTree commodity strategist Nitesh Shah.

“The fundamentals on the ground for copper are really pretty strong, but we’ll probably have a lot of choppiness in base metals prices. My worry is that any time you get good economic news, people may start pricing in that Fed pivot farther away.”

The dollar index =USD slid to a one-week low after the Fed minutes were released and held its losses on Thursday, making metals less expensive for non-dollar holders.

Also lifting prices was news that three of China’s biggest commercial banks have agreed to provide fundraising support to property developers, including industry giant Vanke, in a coordinated effort to support the embattled sector.

“Metals are higher from Chinese banks’ pledge for loans and interest-free terms to other banks for re-lending to developers,” one Singapore-based metals trader said.

Analysts expect China’s copper demand to rise strongly in 2023, boosted by a booming electric vehicle sector and rising investment in renewable power projects.

Among other metals, LME aluminium CMAL3 slipped 0.5% to $2,385 a tonne and nickel CMNI3 dipped 0.2% to $26,250, but zinc CMZN3 was up 0.5% at $2,919.50, lead CMPB3 gained 0.8% to $2,124.50 and tin CMSN3 climbed 1.9% to $22,445.
Source: Reuters (Reporting by Eric Onstad Additional reporting by Brijesh Patel in Bengaluru Editing by David Goodman )

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