By Anna Stablum Nov. 3 (Bloomberg) -- Copper fell in New York and London as the dollar strengthened and Australia’s second interest-rate increase in a month fanned concern about the removal of economic-stimulus measures. The Dollar Index, a six-currency gauge of the greenback’s performance, advanced as much as 0.7 percent to its highest intraday level since Oct. 5. A stronger dollar makes metals priced in the currency more expensive for holders of other monies. Australia’s Reserve Bank raised its benchmark lending rate by a quarter percentage point to 3.5 percent. “There is growing concern there will be less liquidity in the future,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said by phone. “The commodity sector will be one of the most hit, because it is a risky asset class and it has attracted a lot of hot money. If this money is taken out of the market, I don’t see why prices will stay at these levels.” December-delivery copper lost 3.25 cents, or 1.1 percent, to $2.9125 a pound on the New York Mercantile Exchange’s Comex unit at 8:27 a.m. local time. Prices have dropped 5.1 percent from a 13-month high of $3.069 on Oct. 26. Copper for three- month delivery fell 2.3 percent to $6,403 a metric ton on the London Metal Exchange. Prices also slid as inventories of metal in LME-monitored warehouses rose 0.4 percent to 373,800 tons. Stockpiles have increased 8 percent over the past month to the highest level since May 12. ‘Downside Potential’ Higher inventories made copper vulnerable to changes in risk appetite, with “significant downside potential,” according to Michael Jansen, an analyst at JPMorgan Securities Ltd. in London. Prices have more than doubled this year. “Mixed physical demand fundamentals made it hard to buy into the hype around a strong global recovery-driven rebound in copper prices,” Jansen said in a report. The rate increase took place less than a week after the Bank of Japan said on Oct. 30 it would stop buying corporate debt at the end of the year. Central banks around the world are phasing out emergency measures taken at the height of the financial crisis. Still, the base-metals industry is likely to see a “slow improvement as end markets continue to recover,” Moody’s Investors Service said yesterday. Demand remains weak, particularly in the U.S. and Europe, as key consumers such as commercial construction and residential housing remain under “significant pressure,” Moody’s said in an e-mailed report. Construction Demand A quarter of all copper produced is used in construction, according to the Copper Development Association, the second- largest category of consumption after electrical equipment. In Spain, where the economy has shrunk for six quarters as a housing bubble collapsed, registered unemployment rose at the fastest pace in seven months in October, adding to signs that recovery may take longer than other economies in the region. The number of people registering for unemployment benefits increased to the highest since at least 1997, the Labor Ministry said. Among other LME metals for three-month delivery, aluminum fell 1.2 percent to $1,894 a ton, zinc shed 0.9 percent to $2,176 a ton, and lead slid 1.2 percent to $2,270.5 a ton. Tin fell 0.9 percent to $14,650 a ton, and nickel dropped 1.3 percent to $17,859 a ton.

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