NEW YORK/LONDON, March 17 (Reuters) - Copper maintained momentum near one-week highs late Wednesday, buoyed by falling inventories, talk of a Chinese yuan revaluation and improved economic sentiment from a U.S. Federal Reserve pledge to keep interest rates low for some time.
Copper for May delivery HGK0 on the New York Mercantile Exchange's COMEX division jumped 5.30 cents, or 1.6 percent, to settle at $3.4180 per lb, after dealing in a session range between $3.3715 and $3.4360, its loftiest level since March 10. In after-hours trade, prices of the metal used in power and construction were trading above $3.42.
On the London Metal Exchange, benchmark copper CMCU3 hit a one-week high of $7,547.25 a tonne, before closing at $7,534 a tonne in rings from $7,400 on Tuesday. After the close, copper climbed to $7,550.50.
Follow-through momentum from the U.S. Federal Reserve's pledge late Tuesday to keep interest rates near zero for an extended period powered copper prices higher, analysts said.
"The general belief now is we are emerging from recession and that there are brighter days ahead. I think that's the general theme in commodities right now, and copper is a prime benefactor of that," said Michael Gross, futures analyst with Optionsellers.com in Tampa, Florida.
Robin Bhar, an analyst at Credit Agricole, said lower rates will help stimulate growth in the United States, which should help feed into demand for metals.
Stocks of copper in LME warehouses are down 26,750 tonnes since March 1 to a two-month low of 525,575 tonnes.
They are expected to fall further in the second quarter, traditionally the strongest for metals demand.
"It's been a good downtrend," Bhar said.
"Twelve months ago we were in the midst of the downturn. Twelve months on all of that's history," he said. "China's growing quickly and we are expecting growth elsewhere to pick up. We're all set for a reasonably strong Q2."
China repeated its commitment to a stable exchange rate after the U.S. Congress threatened to levy duties on some Chinese exports unless it revalues its currency.
However, some analysts think there is a chance China will allow the yuan to rise against the dollar.
"The underlying message is the yuan will be revalued in some form," said John Meyer, analyst at investment bank Fairfax. "That would be good for metals because China is such a major buyer ... a revaluation makes metals look cheaper in China."
China is the world's largest consumer of copper. It is also the largest consumer and producer of aluminum.
Aluminum CMAL3, used in transport and packaging, hit a two-month high of $2,303 a tonne. It closed at $2,295 a tonne from $2,258 on Tuesday.
The metal has been supported by financing deals, said to have tied up about 70 percent of LME stocks, to release cash for producers and earn high returns for banks.
Sentiment has also been reinforced by a rise in canceled warrants -- material tagged for delivery -- on LME stocks. Aluminum canceled warrants stand at 6.7 percent of total stocks at 4,546,025 -- nearly 95,000 tonnes below the record high above 4.64 million tonnes hit on Jan. 21. Zinc CMZN3, used to galvanize steel, was at $2,345 a tonne from $2,307 and battery material lead CMPB3 traded at $2,255 a tonne from $2,220. Tin CMSN3 traded at $17,750 a tonne from Tuesday's last bid at $17,550 and stainless steel ingredient nickel CMNI3 was at $22,250 from $21,875.