LONDON: Copper prices edged up to a three-week high on Thursday and were on track for their biggest weekly gain in two months, helped by a softer dollar and a cut in Chinese bank reserves to free up liquidity in the world’s top metals consumer.

Three-month copper on the London Metal Exchange (LME) gained 0.2% to $8,578 a metric ton in official open-outcry trading after touching its strongest since Jan. 2 at $8,599.

It also hit a three-week high on Wednesday with the largest daily trading volumes since Sept. 21. The gains came after China’s central bank on Wednesday announced a deep cut in the amount of cash banks hold as reserves - a move that will inject about $140 billion of cash into the banking system.

Metals prices are being supported by optimism over Chinese policy support after a seasonal lull, SP Angel analyst John Meyer said in a note.

“The surprise 50 basis point reserve ratio cut in China has seen buyers step into an illiquid market on expectations of a revival in construction activity,” he added. The move also strengthened the Chinese yuan against a basket of currencies, boosting the purchasing power of consumers in the country to buy dollar-priced metals. The US currency softened after reaching a six-week high. Copper prices are also being supported by recent mining disruptions, with several major banks and research groups revising their balance outlooks from surplus to deficit.

LME aluminium slipped by 0.1% to $2,228 a ton, nickel dropped 0.3% to $16,660, while zinc rose 0.4% to $2,595 and tin advanced 0.4% to $26,625. Lead was trading 0.3% down at $2,156.5.