LONDON: Copper prices in London recovered losses to move into positive territory on the back of a weaker dollar on Wednesday, though gains were capped by fading optimism over the extent to which top consumer China will drive demand for the metal.

Benchmark copper on the London Metal Exchange (LME) was up 0.5% at $8,591.5 a metric ton by 1629 GMT.

Making dollar-denominated metals more attractive to buyers holding other currencies, the US dollar edged down after Federal Reserve Chair Jerome Powell’s comments on the central bank’s fight to lower inflation failed to live up to the more hawkish market expectations.

However, previous optimism over Chinese demand appears to have waned somewhat.

“Last week there was a lot of news coverage expecting more stimulus in China. However, our sense is that whether it is monetary, property or infrastructure stimulus, any stimulus is more likely to be targeted and fairly moderate,” said Amelia Xiao Fu, head of commodity markets strategy at BOCI Global Commodities.

She added that copper could still find support from the growth in sectors related to energy transition, such as electric vehicles, renewable energy storage and charging stations, which has offset weakness elsewhere.

Shanghai copper prices hit a two-month high after the copper premium in the Chinese spot market rose to an eight-month high, partly because of a weaker yuan. The Chinese markets are closed on Thursday and Friday for the Dragon Boat Festival.

LME copper stocks fell by 1,600 metric tons to a one-week low of 84,725.

Among other metals, LME aluminium was up 0.1% at $2,232, facing resistance from the 21-day moving average of $2,240. LME total aluminium stocks fell by 4,750 metric tons to 550,925 tons, the lowest since mid-April.

Zinc, meanwhile, rose 2.6% to $2,420, tin gained 2.2% to $27,425 and nickel slid by 3.4% to $21,280 while lead gained 1.1% to $2,167 after touching its highest since April 14 at $2,176.