Copper, zinc fall as strong dollar weighs on industrial metals

LME zinc CMZN3 fell 0.82% on Wednesday, while SHFE zinc SZNcv1 was down 1.46%.

Zinc under cancelled warrants, meaning material marked for withdrawal from LME warehouses MZNSTX-TOTAL, hit 30,875 tons on Tuesday, the highest in more than a year.

Rising rate-hike expectations also weighed on base metals. Rate traders are pricing in a 70% chance that the U.S. Federal Reserve will raise interest rates at its September meeting, up from 37% a week ago, according to the CME's Fedwatch tool.

Hawkish comments from Fed Chair Kevin Warsh last Friday also raised rate-hike expectations. Higher interest rates can weigh on metal demand by dampening economic activity.

Among LME metals, aluminium CMAL3 lost 0.35%, lead CMPB3 fell 0.42%, nickel CMNI3 dipped 0.09% and tin CMSN3 declined 1.09%.

On the SHFE, aluminium SAFcv1 ticked 0.12% higher, lead SPBcv1 edged 0.12% higher, nickel SNIcv1 lost 0.67% and tin SSNcv1 dropped 2.47%.

Copper and zinc fell on Wednesday, as a strong dollar and fears of interest rates staying higher for longer weighed on the wider industrial metals complex, offsetting support from tight supply.

Benchmark three-month copper CMCU3 on the London Metal Exchange was down 0.86% at $14,152 a metric ton by 0700 GMT. The most-traded copper contract on the Shanghai Futures Exchange SCFcv1 fell 1.35% to 108,040 yuan ($16,069.97) a ton.

The dollar held firm after overnight gains, as renewed hostilities in the Middle East pushed oil prices higher, revived inflation concerns and sparked a selloff in the bond market.