Copper dances to dollar's tune

Copper rose to an eight-month high before retreating on Wednesday, tracking dollar weakness but finding some support from improving economic sentiment. Copper for three-months delivery on the London Metal Exchange ended at $5,180 a tonne from a close of $5,170 on Tuesday. The metal used in power and construction hit a day's high of $5,264, its highest since mid-October.
"Copper has been up and down...a bit of a roller coaster ride," said Michael Khosrowpour, an analyst at Triland Metals. "There is definitely a lot of funds behind the recent push...it's an added propeller when you see a weaker dollar." Copper has gained 8 percent this month as recent improvement in economic data has helped lift the demand outlook.
Aluminium closed at $1,645 a tonne from $1,664, having hit a session high of $1,701, its highest since December 2. Stocks of aluminium in LME warehouses fell 3,225 tonnes, just below a record near 4.3 million tonnes. Aluminium prices rose the week before when stocks dipped on two days, falling for the first time since April 20.
But analysts warned the outlook for aluminium remained weak, as a potential economic recovery would likely be slow and drawn out, and ahead of a series of possible production restarts in China. Growing optimism over the global economy was reflected in a surge in equities - European shares rose about 1 percent.
Consumer prices in China, the world's top copper consumer, fell in the year to May for the fourth month in a row, but at a slightly more moderate pace, reassuring economists who play down the risk that deflation could take root. Among other industrial metals, zinc rose to $1,625 from $1,605. It earlier hit $1,650 its highest since October 2. Lead closed at $1,751 from $1,730. It hit a session high of $1,782, its highest since early October.
"The commodities market is, in our view, overheated and the majority of positive developments have already been sufficiently priced in," said Commerzbank analysts in a note. "However, given its immense price momentum, the upward trend is likely to continue for the short term." Tin ended at $15,750 from $15,775. It also hit an 8-month high, of $15,870. Nickel fell to $14,905 from $15,000, and also hit its highest since early October, at $15,690.