Copper prices steadied on Monday, after earlier touching their lowest level in almost three months, as the dollar pulled back from an earlier four-year high against a basket of currencies. Nickel slid as inventories piled up to another record high. Benchmark copper on the London Metal Exchange (LME) was up 0.35 percent at $6,740 by 1449 GMT after falling to a session low of $6,666 a tonne, its weakest since June 16.
The dollar was still near multi-year highs against the yen, euro and a basket of currencies. After a three-month rally, the dollar index has gained more than 7 percent this year. A buoyant dollar puts pressure on commodities priced in the US currency, making them more expensive for buyers outside of the United States. "I strongly think that the dollar will remain strong and this is going to keep the pressure on the demand side for metals," said Naeem Aslam, chief market analyst at Ava Trade.
A strong reading of US non-farm payrolls data due on Friday could help add to speculation about when the United States will start to raise interest rates and help boost the dollar, Aslam said. "A stronger number on Friday could push the dollar further higher." On Monday, US data was mixed as consumer spending rose slightly more than forecast in August, while US pending home sales fell by more than expected.
Also weighing on metals prices were concerns about the outlook for demand from China, which consumes as much as 40 percent of global refined copper, after data showed industrial profits fell 0.6 percent, reversing July's 13.5 percent rise. But the big figure this week - an official reading on China's factory sector growth on Wednesday - is expected to show that growth probably steadied in September as factory orders held up, providing some welcome relief for those who worry the Chinese economy is quickly losing steam.
Hedge funds and money managers switched the copper market into a net short position in the week to September 23, the Commodity Futures Trading Commission said on Friday. "There is growing pessimism among speculative financial investors, who built up considerable net short positions in copper again in the week to 23 September," Commerzbank analysts said in a note.
In other metals, benchmark nickel fell 1.6 percent to $16,702 a tonne following another inflow of inventories and after closing clearly below the 200-day moving average on Friday for the first time since February, which sparked chart-based selling. "LME stocks surged higher this morning, underlining the availability of refined metal," analyst Leon Westgate at Standard Bank said in a note. LME nickel inventories rose by 5,370 tonnes on Monday to a record high of 353,340 tonnes.