Metals fell as the strengthening dollar and prospects for higher US interest rates reduced demand for commodities.
|||London - Metals fell, sending copper lower for a second day, as the strengthening dollar and prospects for higher US interest rates reduced demand for commodities.
Aluminum, lead, nickel, tin and zinc fell more than 1 percent. Copper declined 0.8 percent to $4 526 a ton at 10:44 a.m. in London, approaching a six-year low.
Copper, nickel and zinc have wiped out gains made after smelters in China, the world’s biggest supplier of refined metals, announced output cuts. Copper producers agreed a reduction of 350 000 tons in 2016, following similar statements by nickel and zinc smelters. The curbs will offer only fleeting price support, analysts from Morgan Stanley said in research note dated December 2.
Comments from Federal Reserve Chair Janet Yellen reinforced expectations that interest rates will soon rise, adding pressure to commodities.
If the Fed waits for too long to end the era of near-zero interest rates "we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both our goals," Yellen told the Economic Club of Washington on Wednesday.
“The Yellen speech left even less doubt about the Fed beginning to tighten monetary policy at its coming meeting, and secondly there’s a little bit of position squaring going on into the ECB meeting,” Ric Spooner, a chief markets analyst at CMC Markets Asia Pacific, said by phone from Sydney.
“There is this relentless background pressure in commodities that is essentially the fact that supply is exceeding demand.”
Commodities are usually priced in dollars, so a stronger U.S. currency makes raw materials are more expensive in other countries and reduces demand. The Bloomberg Dollar Spot Index, which tracks the greenback against a basket of 10 global currencies, has risen almost 10 percent this year.
-With assistance from Martin Ritchie.
