By Rachel Graham and Jae Hur Feb. 19 (Bloomberg) -- Copper fell the most in a week in London as the dollar strengthened, reducing the appeal of raw materials as an alternative investment, after the Federal Reserve raised the discount rate. The dollar jumped to a nine-month high against the euro after the Fed increased the rate charged to banks for direct loans for the first time in more than three years. Gains by the U.S. currency make dollar-priced commodities more expensive for holders of other monies. “It’s a dollar story today,” Robin Bhar, an analyst at Credit Agricole SA’s Calyon unit in London, said by phone. “That’s put pressure on all the metals. There is a lot of speculative money in copper.” Copper for three-month delivery fell $69, or 0.9 percent, to $7,196 a metric ton at 9:54 a.m. on the London Metal Exchange, paring this week’s gain, the second in a row. The contract slid as much as 2.1 percent, the most since Feb. 12 in intraday terms. May-delivery copper dropped 1.2 percent to $3.2665 a pound on the New York Mercantile Exchange’s Comex unit, the first decline in four days. The Fed raised the discount rate to 0.75 percent from 0.50 percent, the first increase since June 2006. The step was the central bank’s most explicit signal yet that the emergency supply of liquidity to financial markets is done and the most aggressive monetary policy easing in its 96-year history will eventually reverse. Weaker Euro The U.S. currency headed for a sixth week of gains against the euro. The single European currency slid as much as 0.6 percent to $1.3444, the lowest since May 18, and recently traded at $1.3502. A slump by the dollar helped copper prices to more than double in 2009. Copper has added 5.7 percent this week on the LME. Prices may decline in London next week on speculation that further gains by the dollar will sap demand for the metal as an alternative investment, a survey showed. Ten of 20 analysts, investors and traders surveyed by Bloomberg, or 50 percent, said copper would drop next week. Eight predicted higher prices and two expected little change. “The copper price is just about totally dependent on the strength, or lack thereof, in the dollar,” said Mark Lewon, vice president for operations at Utah Metal Works Inc. in Salt Lake City, Utah. Aluminum for three-month delivery was 1.1 percent lower at $2,090 a ton on the LME. Demand for aluminum-rolled products may climb in Asia this year, according to the region’s biggest producer. “We expect the Asia-wide rebound from the financial crisis to continue in the calendar year,” said Sachin Satpute, 43, vice president for sales and marketing at Novelis Korea Ltd., a unit of India’ Hindalco Industries Ltd. He gave no forecasts for the company’s sales. Zinc fell 0.7 percent to $2,293.75 a ton and nickel lost 1.4 percent to $20,170 a ton. Lead fell 1.3 percent to $2,288 a ton and tin dropped 0.3 percent to $16,900 a ton. To contact the reporters on this story: Rachel Graham in London at rgraham13@bloomberg.net; Jae Hur in Tokyo at jhur1@bloomberg.net

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