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A stronger dollar has weakened investors’ appetite for the base metals this morning.
The dollar index jumped above 93 on Tuesday – the first time since late December last year – following US President Donald Trump’s announcement that the United States would be withdrawing from a multilateral nuclear pact with Iran, with plans to reinstate sanctions against the latter.
The index has continued to strengthen this morning. It was up by 0.08% at 93.18 as at 11.33am Shanghai time – this compared with a high of 93.29 on Tuesday.
Markets are adopting a wait-and-see approach in response to the US’ decision to withdraw from the Iran nuclear deal, waiting to see just how the decision will play out in terms of heightened geopolitical stress in the Middle East.
The more cautious tone in the market has also applied downward pressure to prices.
The most-traded July copper contract on the SHFE traded at 51,090 yuan ($8,020) per tonne as at 11.33 am Shanghai time, down 280 yuan per tonne from Tuesday’s close. Around 110,644 lots had changed hands.
This weakness despite positive trade data out of China on Tuesday that showed total unwrought copper imports in April climbed by 47.3% year on year to 442,000 tonnes, according to ANZ Research.
The higher import volumes dispelled concerns of weakening growth in the world’s largest commodity consumer although with the US-China relations floundering on trade negotiations based on last week’s talks, China will now likely send Vice Premier Liu He to the US to try to rescue the negotiations.
Yet the outlook for the red metal still remains murky according to INTL FCStone analyst Edward Meir, who noted that the industry’s current bearish environment can be chalked up to five factors.
Base metals prices
Currency moves and data releases