US copper futures ended Friday with only small losses after making sizeable declines all week, but a greater-than-forecast increase in US manufacturing data and a bout of short covering pulled prices up from their three-week lows, traders said.
Copper for March delivery was down 0.45 cents at $2.9565 a lb. It fell to a level last seen on November 23 at $2.92 on the New York Mercantile Exchange's COMEX division following the US Consumer Price Index report. The session high was at $2.98.
Copper prices suffered early when a large build in London Metal Exchange stocks hit copper prices. The red metal extended its decline as the dollar rose when US consumer inflation accelerated at its fastest pace in over two years.
"I think it's end-of-the-week short-covering. I wouldn't make too much of it. We almost got down to recent lows. I don't think there's much to save it unless the Chinese come in as massive buyers or the stock market somehow manages to rally dramatically and the dollar turns back down," said a broker.
After recent surprisingly strong US economic data and signs of inflation heating up, he pointed out that the dollar looks like it may be making a trend change.
The dollar posted its largest daily increase against the euro in more than three years after the 0.8 percent rise in the November US CPI was reported, its fastest pace in more than two years.
With jumps in two key inflation readings in as many days, dollar buyers were betting that the Federal Reserve would most likely keep its US interest rate target steady.
"Stronger-then-expected consumer inflation, producer inflation, import prices all show price pressures exist in the US People cannot be as confident as before that they'll see a January rate cut from the Fed," said Marc Chandler, senior currency strategist at Brown Brothers Harriman.
A stronger dollar hurts purchases of dollar-denominated assets like copper in overseas markets. Later, a greater-than-expected 0.3 percent gain in November industrial production, up from forecasts for a 0.1 percent gain and a strong rebound from the 0.7 percent decline in October, provided support for copper prices.
After all of the selling this week, from $3.14 a lb at Monday's high down to the Friday low at $2.92 a lb on March copper, traders said many players were hanging on the sidelines waiting to see if prices have found support. Participants vary on whether they think the downdraft will continue or if copper may have found support.
"I don't think it's found a support level at all. I think the selling is based on some year-end book squaring and worries about the economy," said one dealer. Some technicians are targeting a November 23 low at $2.8880 on the continuation chart and a March low around $2.75 as next downside targets.
Others said anecdotal evidence from sellers who deal with Chinese consumers suggests they are short copper and will need to buy material, but not much has surfaced in recent sessions.
On the other hand, copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 4 percent in the week ended on Thursday, their fifth consecutive decline. LME copper for delivery in three months ended higher at $6,545 a tonne than $6,510 at Thursday's kerb close.