Copper hits one-week high

Copper hit a one-week high on Wednesday as the dollar slipped, inventories fell and talk of a Chinese yuan revaluation helped boost sentiment. Benchmark copper on the London Metal Exchange hit a session high of $7,547.25 a tonne. The metal used in power and construction traded at $7,516 a tonne in official rings from $7,400 at the close on Tuesday.
The dollar came under pressure after the US Federal Reserve pledged to keep interest rates near zero for an "extended period". A lower dollar makes metals cheaper for holders of other currencies. "The dollar is weakening and copper stocks keep declining, it's all positive," said David Thurtell, analyst at Citi.
Stocks of copper in LME warehouses are down 26,750 tonnes since March 1 to a 2-month low of 525,575 tonnes. They are expected to fall further in the second quarter, traditionally the strongest for metals demand. "We maintain that copper fundamentals, which have...begun to tighten, will likely continue to do so as (developed market) demand continues to improve against slowing but still robust (emerging market) demand," Goldman Sachs said in a note.
The Fed's decision to keep benchmark interest rates in a zero to 0.25 percent range would also help consumer demand in the United States, the world's largest economy, which would feed through to global growth, traders said. China repeated its commitment to a stable exchange rate after the US Congress threatened to levy duties on some Chinese exports unless it revalues its currency.
However, some analysts think there is a chance China will allow the yuan to rise against the dollar. "The underlying message is the yuan will be revalued in some form," said John Meyer, analyst at investment bank Fairfax. "That would be good for metals because China is such a major buyer ... a revaluation makes metals look cheaper in China." China is the world's largest consumer of copper. It is also the largest consumer and producer of aluminium. Aluminium, used in transport and packaging, hit a two-month high of $2,293 a tonne. It traded at $2,277 a tonne from $2,258 at the close on Tuesday.
The metal has been supported by financing deals, said to have tied up about 70 percent of LME stocks, to release cash for producers and earn high returns for banks. Sentiment has also been reinforced by cancelled warrants - material tagged for delivery - on LME stocks.
Aluminium cancelled warrants stand at 6.7 percent of total stocks at 4,546,025 - nearly 95,000 tonnes below the record high above 4.64 million tonnes hit on January 21. Zinc, used to galvanise steel, was untraded in the rings, but bid $2,343 a tonne from $2,307 and battery material lead traded at $2,275 a tonne from $2,220. Tin traded at $17,675 a tonne from Tuesday's last bid at $17,550 a tonne and stainless steel ingredient nickel at $22,150 from $21,875.