Copper Drops as Dollar Strengthens Ahead of Fed Minutes

Copper prices dipped on Wednesday as the US dollar strengthened and oil prices climbed, setting the stage for traders ahead of the Federal Reserve’s September meeting minutes. On the London Metal Exchange (LME), three-month copper dropped 0.25% to $14,379 per metric ton, while the dollar index rose to 102.05. Since copper is priced in dollars, a stronger dollar makes the metal more expensive for buyers using other currencies, which can dampen demand.

The rise in oil prices, driven by supply concerns, adds another layer of complexity. Higher energy costs can contribute to persistent inflation, making the Fed’s policy decisions even more critical. Investors will scrutinize the Fed minutes for signals on whether interest rates will remain elevated for longer. This could raise borrowing costs across the economy, potentially weighing on growth-sensitive materials like copper.

Higher interest rates also impact metals through financing and storage costs, reducing traders’ willingness to hold inventory. However, not all metals followed copper’s decline. Aluminum prices edged up due to supply-risk concerns tied to Middle East tensions, despite remaining below earlier highs.

In the short term, copper often reacts more to broader economic factors than its industrial demand. A stronger dollar and tighter Fed policy can pressure copper prices by increasing borrowing and inventory costs, making the metal particularly sensitive to Fed communications and rate expectations, even as long-term demand drivers like electrification and AI data centers remain steady.