Decline in the US dollar helped copper contract prices break through the highest level in nearly 8 weeks

At the beginning of the week, the US dollar continued to weaken amidst expectations that the Fed has done raising interest rate this year, almost falling below the 103 mark; copper contract prices moved higher, with LME copper peaking at $8,486/mt, and the most active SHFE 2401 copper contract prices peaking at 68,350 yuan/mt. In mid-week, US Department of Labor data showed that the number of initial jobless claims in the week ending November 18 fell to a five-week low of 209,000, and the number of continued jobless claims fell to 1.84 million, the first decline in nearly two months. The strong US job market drove the US dollar to stop falling and rebound slightly. However, orders of US durable goods fell 5.4% month-on-month in October, compared to an expected decline of 3.2%; there is resistance to the dollar returning above 104. The minutes of the Federal Reserve's November interest rate meeting showed that the Fed believes "it is appropriate to slow down interest rate increases at present" but reiterated its 2% inflation target. High interest rates may continue, and the timing of an interest rate cut is not yet clear. In the second half of the week, the US dollar index stabilised above the 5-day moving average, and the support for copper contract prices weakened.

The eurozone's manufacturing PMI in November was 43.8, which was higher than market expectations and the previous reading. Although it is still below 50, the degree of economic contraction in the eurozone appeared to have eased. Villeroy, a member of the European Central Bank's Governing Council, said: "Barring unexpected events, the ECB will not increase borrowing costs again." The euro stopped falling but did not regain upward momentum. In the Chinese market, on November 20, the People’s Bank of China released the November loan market interest rate, with both the 1-year and 5-year LPR remaining unchanged. The offshore yuan maintained its appreciation pace and rose to around 7.12 during the week. In addition to the fall of the US dollar, the solid recovery of the domestic economy and seasonal demand for foreign exchange settlement have also pushed the yuan upward.

Copper prices broke through the 68,000 yuan/mt mark during the week and stood firmly above the level. Spot premiums against the SHFE 2312 copper contract exceeded 700 yuan/mt on Monday, reaching the highest level during the year; downstream purchasing sentiment was severely suppressed, and even furnace shutdowns occurred. With weak consumption, spot premiums fell sharply in mid-week. The premiums of 300 yuan/mt were acceptable for downstream buyers. Consumption picked up, and the premiums rebounded. While the SHFE/LME copper price ratio continued to fall below 8.2 during the week, the significant appreciation in the yuan and high premiums in the domestic spot markets ensured high import profits against spot copper in Shanghai. Imports saw small losses or were slightly profitable against the SHFE front-month copper contract. There were continued inflows of cargoes from China's bonded zone inventories. LME copper inventories at Asian warehouses continued to be destocked. There will be additional inflows of imported copper into China in the future. Supply will remain normal.