LME copper prices fell 2 percent on Wednesday after Federal Reserve’s Bernanke bleak assessment of the US economy depressed market sentiment, and with a stronger dollar also weighing.
“Growth is slowing. Momentum is slowing,” said VTB Capital analyst Andrey Kryuchenkov, adding that the Fed comments only underlined what was evident from bearish data published last week.
A slightly stronger dollar was also weighing on metals.
The dollar recovered from a one-month low against a basket of currencies although it was trading lower against the yen, in a general flight away from risk to safety.
Investors were unwinding risky positions in stocks and commodity-linked currencies buying the dollar, yen and swiss franc.
A stronger US currency makes dollar-priced commodities costlier for holders of other currencies. Looking at fundamentals, the copper outlook seemed to be slowly improving, Kryuchenkov said.
“It seems like in China things are getting a bit better. Inventories are going down, which is ok, but I want to see LME copper in backwardation first.