Copper reversed earlier gains on Wednesday as the dollar broadly rose after Federal Reserve Chairman Ben Bernanke said he could begin reining in stimulus. Benchmark copper for three-months delivery on the London Metal Exchange closed at $6,540 a tonne from a close of $6,590 on Tuesday.
Used in power and construction, the red metal earlier rose to peak at $6,673.50 before falling as low as $6,494.50. "The dollar has recovered somewhat," said Steve Hardcastle, an analyst at Sucden. "Now Bernanke has been opening his mouth, suddenly the dollar has done a 180 degrees turn.
"Currencies are a major influence at the moment ... and we're clutching at straws a little bit, bearing in mind the Chinese are on holiday as of Friday." Bernanke said the Fed could begin pulling back its unprecedented stimulus for the US economy by first removing some cash from the financial system and then raising interest rates,
The dollar extended gains against the euro after Bernanke's speech. Analysts described his remarks as "hawkish," suggesting the US economy was on a stable path to recovery.
A firm US currency makes metals priced in dollars more expensive for holders of other currencies. Helping cap losses however, data showed China's January imports of unwrought copper and semi-finished copper products fell 21 percent on the month, to 292,096 tonnes, but the fall was much lower than market players had estimated.
The arbitrage between Shanghai and LME copper stood around 1,500 yuan while the gap between zinc markets was about 800 yuan, both of which should encourage imports. Analysts expected trading to quieten down in the lead up to the Chinese new year holiday that will close the Chinese market for a week from February 14. Some analysts were confident the longer-term outlook for base metals demand and prices remained strong.
"The global economic recovery is still on track, Chinese demand is still very robust, policy makers are in no rush to reduce liquidity, and many base metals are still facing structural supply shortages," Leon Westgate, an analyst at Standard Bank, said in a note.
But top global miner BHP Billiton signalled caution over a sustained global recovery and held off from a share buyback after reporting its weakest first-half profit in four years.
Aluminium ended at $2,030 from $2,056. Stocks of aluminium stand near 4.6 million tonnes, but fell 5,750 tonnes to continue a recent trend of drops that has brought stocks away from a record high above the 4.6 million-tonne level. Zinc closed at $2,114 from $2,104 and battery material lead ended at $2,045 from $2,032.5. Tin closed at $15,700 from $15,500 and nickel at $17,710 from $17,550.