(June 24): Copper and industrial metals extended losses as a stronger dollar and the Federal Reserve’s hawkish stance weighed on the demand outlook.
Copper fell as much as 2.1% on the London Metal Exchange while a gauge of the greenback extended this week’s gain to nearly 1%. A growing conviction that interest rates will have to remain high is a headwind for all risk assets while a rising dollar compounds the impact on commodities priced in the currency.
New Federal Reserve chair Kevin Warsh set a hawkish tone at his first rate-setting meeting last week, where policymakers signalled growing support for higher borrowing costs while leaving rates unchanged. The outlook jolted investors and offset the positive impact from an interim US-Iran peace deal that’s allowed commercial vessels to move in greater numbers through the Strait of Hormuz.
“Base metals trading is currently dominated by Fed monetary policy,” said Gao Ying, an analyst with Shuohe Asset Management Co. “There are hardly any speculative long positions in base metals at the moment.”
Copper fell 1.9% to US$13,117.50 a tonne as of 3.53pm in London. Aluminium extended losses after falling 3.9% on Tuesday to a three-month low. The Bloomberg Dollar Spot Index rose 0.3%.
See also: Indonesia plans to boost nickel output, fuelling price drop
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