Base metals edged up on Tuesday on the London Metal Exchange (LME) on a weaker dollar, but trade was subdued and cautious before the US Federal Reserve's decision on interest rates, traders said. Three-months copper closed at $3,279, up $29 from Monday's London kerb close, after trading between $3,245 and $3,287.50. The market gained on the back of a weaker dollar, Standard Bank analyst Robin Bhar said.
"But with the Fed meeting tonight, there's a bit of cautious trading," he said. "People are not willing to put any large positions."
The Fed is set to announce its rate decision at 1915 GMT.
"The market will be waiting for the wording of the FOMC statement to see if there are any hints that rates might start rising at a faster rate," William Adams of BaseMetals.com said.
"Such a development could bolster the dollar and bring more downward pressure on the metals."
By 1700 GMT the euro was trading at around $1.3208, up from $1.3171 in late New York trade on Monday. A weaker dollar makes dollar-based industrial metals more attractive to investors holding other currencies.
But analysts said the metals complex is gearing up for a significant sell-off, which could take place as the first quarter ends.
Fund exposure to commodity markets is at its highest since last April, although base metals are less vulnerable than the precious and softs sectors to a sell-off, Barclays Capital said.
In its weekly investor report, Barclays said the net long fund position in copper represented just over a quarter of open interest, off last year's peak of 44 percent.
This was not excessive in relation to the level of prices, but the current net long position was sufficiently large to cause a sharp correction in prices should sentiment turn.
"We will see it," Bhar said. "How much and how quickly we might see the downside being tested."
He said in a daily note that support was evident at $3,250, $3,200 and $3,175, with resistance at $3,295-$3,305.
Other metals took the lead from the copper market.
Aluminium was up $10 at $1,982 after dipping to $1,955.
Zinc ended $5 higher at $1,387 and lead rose $9 to $968.
Nickel was $125 higher at $16,175, while tin was unchanged at $8,350.
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