LONDON: Copper prices softened on Tuesday as inventories in London Metal Exchange-registered warehouses jumped, but losses were capped by a weaker dollar as the market awaited manufacturing data from top consumer China.
Benchmark copper on the LME was down 0.1% at $6,568 a tonne by 1558 GMT. Prices of the metal used widely in power and construction are down nearly 5% since hitting a 27-month high at $6,877.50 this month.
"Earlier the higher dollar and copper stocks were behind the profit-taking on long positions," one metals trader said. "This afternoon the dollar is down and we've seen some buying on the back of that."
A weaker US currency makes dollar-denominated metals cheaper for consumers using other currencies, which could subdue demand.
This relationship is used by funds that trade using buy and sell signals generated by numerical models.
Surveys of purchasing managers in China's manufacturing sector due on Wednesday will be scrutinised for clues to demand growth for industrial metals.
China's home prices are expected to rise slightly more this year than expected, though at a slower pace than last year, as Beijing shifts to deleverage the sector amid an economic recovery, a Reuters poll showed.
Copper stocks in LME warehouses, at 136,325 tonnes, are up more than 40% since falling to 76,325 last week, their lowest since December 2005. Cancelled warrants - metal earmarked for delivery - have fallen to 30% from close to 60% last week.
The deliveries have eased concern about supplies on the LME market and the premium for the cash contract over three-month copper has moved to a discount.
Upside resistance for copper comes in at the 21-day moving average, currently sitting at $6,645. It has struggled to hold above the 50-day moving average, currently at $6,475.
Aluminium was up 0.2% at $1,779 a tonne, zinc fell 0.4% to $2,421, lead rose 0.4% to $1,842, tin gained 0.6% to $17,450 and nickel slipped 0.4% to $14,440.
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