Copper price falls due to strengthening of the dollar and the Fed’s commitment to rate hikes

Copper prices slipped on Wednesday under pressure from a stronger dollar after the Federal Reserve reaffirmed its dovish outlook.

Fed Chairman Jerome Powell has promised that the Fed will raise interest rates as much as necessary to end an acceleration in inflation that he said threatens the foundations of the economy.

The comments sent the dollar higher, reducing demand for assets priced in the greenback as it makes them more expensive for holders of other currencies.

Meanwhile, sentiment remains under pressure from China’s “zero COVID” strategy, which has complicated a global rebound in production of everything from mobile phones to electric vehicles. The restrictions are scheduled to be lifted on June 1.

“We are concerned that metal prices have probably peaked in the first quarter of this year,” Julius Baer analyst Carsten Menke said. “Chinese demand in the medium and long term will have a hard time recovering from this shutdown.”

Benchmark three-month copper on the London Metal Exchange (LME) was down 0.7% at $9,303 a tonne at 1050 GMT, snapping a three-session winning streak.

Total copper stocks in LME-licensed warehouses increased 2.5% to 180,925 tonnes. About 44% of that amount is reserved for delivery and is not available for the market.

In other base metals, aluminum on the LME was up 0.5% at $2,905 a tonne; zinc fell 0.6% to US$3,639; lead fell 0.8% to $2,085; tin fell 1.3% to US$33,615; and nickel lost 0.8% to $26,180.