By Anna Stablum Feb. 25 (Bloomberg) -- Copper fell in London as the dollar gained against a basket of currencies, reducing the appeal of industrial metals as an alternative investment. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, rose as much as 0.3 percent, making dollar-priced metals more expensive to other currency holders. Europe’s single currency fell toward a nine-month low against the dollar after Standard & Poor’s and Moody’s Investors Service said Greece faces further downgrades as early as next month as it wrestles with the European Union’s biggest budget deficit. Greece’s situation “is contributing to risk aversion and it is affecting all financial markets really, and base metals are no different from any other,” Stephen Briggs at RBS Global Banking & Markets in London said today. “The base metals are going to remain under a bit of pressure and we expect prices to weaken during the first half of this year.” Copper for three-month delivery slid $83.50, or 1.2 percent, to $7,069 a ton at 9:36 a.m. on the London Metal Exchange. Copper for May delivery dropped 1.3 percent to $3.210 a pound on the New York Mercantile Exchange’s Comex unit. The dollar strengthened ahead of a report forecast to show orders for durable goods probably increased in January by the most in four months. “If we get another materially below-expectation number it is going to make people start to worry about the durability of the economic recovery,” RBS’s Briggs said. ‘Unwinding’ The Commerce Department’s durable goods report is due at 1:30 p.m. in London. Bookings for goods meant to last several years increased 1.5 percent last month after a 1 percent gain, according to the median estimate of 72 economists surveyed by Bloomberg News. Another report from the Labor Department may show initial claims for unemployment benefits fell last week. Investment demand for commodities, especially metals, may wane in the next three months, according to Allianz Investment Management. “There could be a lot of unwinding” of bets that raw materials will advance, Nikhil Srinivasan, who oversees about $30 billion of assets as chief investment officer for Asia and the Middle East, said in an interview yesterday. “That will keep them from having a strong year.” Copper has dropped 3.7 percent this year as China, the biggest consumer, took steps to curb record lending and Greece’s budget crisis shook confidence in Europe, pushing the dollar higher. Federal Reserve Chairman Ben S. Bernanke said yesterday the U.S. economy still needs low interest rates to encourage demand by consumers. Stockpiles Slip Copper prices were supported as bookings to remove copper from warehouses monitored by the LME rose 19 percent to 16,600 tons, according to a daily exchange inventory report. Copper stockpiles slipped 0.4 percent to 550,225 tons. Aluminum for three-month delivery fell 1.9 percent to $2,097 a ton on the LME. Stockpiles slid 0.1 percent to 4.6 million tons. Canceled warrants climbed 0.1 percent to 304,600 tons, or 6.7 percent of total aluminum inventories, the highest since 2006. “I’m not sure this suggests real demand, it could mean material is being taken out to be stored more cheaply off- warrant,” RBS’s Briggs said. Zinc shed 1.3 percent to $2,175 a ton, while nickel dropped 0.2 percent to $20,430 a ton. Lead fell 1.8 percent to $2,175 a ton and tin was down 0.4 percent at $16,900 a ton. To contact the reporter on the story: Anna Stablum in London at astablum@bloomberg.net.

Source