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Weaker dollar lifts copper as market awaits China data

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LONDON — Copper prices rose on Monday, supported by a weaker dollar while the market awaited data from top consumer China for a better steer on demand prospects.

Benchmark copper on the London Metal Exchange (LME) was up 1.7% at $7,991 a tonne at 1605 GMT.

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The dollar has retreated against a basket of other currencies since reaching 20-year highs last week. A weaker U.S. currency makes dollar-priced metals cheaper for buyers holding other currencies.

“The base metals complex has been supported by the weaker dollar this morning,” said Sucden Financial analyst Geordie Wilkes, adding that U.S. inflation data this week will help to shed light on Federal Reserve policy intentions.

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U.S consumer prices data is expected to determine whether the Fed raises interest rates by 50 or 75 basis points next week.

Partly offsetting the dollar’s boost from higher interest rates are calls from European Central Bank officials for its own aggressive monetary tightening.

“The net effect of a steady dollar would be good news for copper,” one trader said, adding that volumes were subdued because of a holiday in China, which this week releases data on investment, industrial production and house prices.

Meanwhile, worries about copper supplies in the LME system have created a premium, or backwardation, for cash metal over the three-month contract. The premium was last at $110 a tonne and compares with $145 last week, its highest since last November.

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“The backwardation in the copper market has weakened, but the tightness remains clear with low availability of copper stocks in exchange warehouses,” Wilkes said.

Aluminum prices rose 0.2% to $2,290 a tonne as supply concerns fueled by production cuts in Europe in response to soaring power prices were reinforced by expectations of curtailments in China’s Yunnan province.

Power problems in Europe and China are also behind higher zinc prices.

Zinc gained 1.2% to $3,206 a tonne, lead added 1.7% to $1,950, tin advanced 1.6% to $21,510 and nickel climbed 6.5% at $24,500.

(Reporting by Pratima Desai Editing by David Goodman and David Evans)

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