Strong Dollar Weighs on Copper Prices Amid Supply Jitters

Copper prices edged lower as traders focused on a stronger US dollar and the risk of higher interest rates for longer, despite a spike in London Metal Exchange withdrawal requests indicating tighter supply.

The LME three-month copper fell 0.41% to $14,214 a metric ton, while China's most-traded SHFE contract rose 0.17% to 107,930 yuan ($16,051.93) at an exchange rate of $1 = 6.7238 yuan.

A stronger dollar tends to weigh on dollar-priced commodities by making them more expensive for non-US buyers, and traders have been repricing the path for the Federal Reserve after fresh geopolitical and tariff worries. The CME's FedWatch put the odds of a September hike at 42%, up from 36% a week earlier.

However, physical market signals suggest tighter supply. Reuters noted a jump in LME warrant cancellations, which are requests to pull metal out of LME warehouses. This can lead to an import-arbitrage incentive: traders can buy copper in one market, ship it, and sell it in the other for a profit.