Base metals trim losses on weaker dollar

LONDON, Oct 17 - Rising inventories sent copper prices to a week low on Wednesday, but the metal trimmed some of its losses after the dollar lost ground. Copper for delivery in three months on the London Metal Exchange ended the open outcry trade at $7,960 per tonne, down $75 from Tuesday, when it shed 1.4 percent. The metal, used extensively in construction and wiring, earlier fell to $7,910 per tonne, its lowest since October 9. Home construction starts in the United States fell in September to their lowest level in more than 14 years, showing another sign of a possible slowdown in the economy -- an element which could curb demand for industrial metals. But the market focused on the dollar's fall after the U.S. data, making prices of base metals cheaper for local currency holders. "Data was weak, suggesting the Fed cutting rates and that is not good for dollar. Dollar weakness is supportive for base metals and people focused on that," analyst Robin Bhar at UBS said. Traders sold dollars after the Commerce Department said home construction starts fell 10.2 percent last month, below Wall Street's consensus forecast. A weaker housing market and a slow U.S. economy may prompt Federal Reserve policy-makers to cut benchmark interest rates again from the current 4.75 percent. Policy-makers meet next on Oct. 30-31. INVENTORIES WEIGH However rising levels of stocks, particularly in lead and copper, kept metal prices in negative territory. "Lead continues to be weak, especially with another large increase in LME stocks," analyst Leon Westgate at Standard Bank said. "Copper is also being hurt by steadily increasing stocks." "Longer term we still feel positive towards the metal, but nearby it looks weak (technically)," Westgate said. Lead stocks rose for a second consecutive day by 3,775 tonnes to 29,700 -- the highest since mid-August -- and up by 30 percent since its recent low on September 24. Copper stocks reached 143,100 tonnes, their highest since May. Three-month lead futures were down $91 at $3,550 a tonne, bouncing from an earlier low of $3,450. "While we continue to view lead prices positively in light of the tight lead concentrate market, supply disruptions and robust demand from Asia, further sizeable inflows into LME stocks will cap the current rally in prices," Barclays Capital said in a research note. Zinc also cut earlier losses. It hit an intraday low of $2,915, before closing at $2,965, down $80 from Tuesday. London-listed miners were mixed with BHP BIlliton rising almost 2 percent while Rio Tinto was down around 1.5 percent after reporting a fall in third-quarter mining output. Aluminium gained $12 to $2,510, tin shed $125 to $16,375/16,400 and nickel rose $100 to $31,800. Having lost around 38 percent since early May, when it hit an all-time high of $51,800 a tonne, nickel prices have stabilised around $30,000 per tonne. "(In nickel) The project pipeline continues to firm up, though the absence of large imminent projects should support prices, with the Chinese stainless industry continuing to rely on nickel laterite ore over the medium term," Standard Bank said in a research note. In industry news, Anglo-Swiss miner Xstrata Plc has approved the development of the Koniambo nickel mine in New Caledonia and will fund most of the $3.8 billion investment planned for the project.