Benchmark copper on the London Metal Exchange (LME) was up 0.7% at $7,563 per tonne by 1010 GMT in subdued trade due to the Chinese holiday. Metal prices, considered an indicator of economic growth, have fallen 30% since hitting a record high in March.
The dollar slid after data showing that U.S. manufacturing saw its weakest expansion since May 2020, raising the prospect of a less aggressive rise in U.S. interest rates.
A weaker US currency makes dollar-priced metals cheaper for holders of other currencies, which can stimulate demand. This relationship is used by funds to generate buy and sell signals from numerical patterns.
Overall, however, the dollar is near its strongest level in 20 years, which will weigh on demand along with weak consumption due to slowing economies, pushing down copper prices.
“A strong dollar is clearly a headwind,” said BNP Paribas analyst David Wilson.
“Demand in China is a particular headwind, driven mainly by the real estate sector. The Chinese authorities have put in place measures to stem the decline in the real estate sector to little effect.”
China’s property market woes deepened in August as house prices, sales and investment all fell as a mortgage boycott and financial strains on builders further undermined confidence in the sector.
Copper inventories in LME-approved warehouses
Copper broke but failed to hold above the 21-day moving average of $7,650. If this average is breached, copper will face strong resistance at the 50-day moving average, which currently sits at $7,795.
In other metals, aluminum rose 2.5% to $2,276 per tonne, zinc 0.7% to $2,980, lead 0.8% to $1,876, tin 1.1 % $20,290 and 0.7% nickel $21,415.
. (Reporting by Pratima Desai; editing by David Goodman)