METALS-Copper hits two-week high in knee-jerk reaction to softer dollar

By Pratima Desai

LONDON, Aug 26 (Reuters) - Copper prices hit two-week highs on Tuesday after U.S. President Donald Trump's announcement he would remove Federal Reserve Governor Lisa Cook boosted expectations of U.S. interest rate cuts next month and weakened the dollar.

A weaker U.S. currency makes dollar-priced metals cheaper for holders of other currencies and drives demand and prices.

However, traders said the copper price had retreated since the initial knee-jerk reaction due to a steadier dollar and selling by Chinese companies.

Trump said in a letter he was firing Cook over alleged improprieties in obtaining mortgage loans. Analysts say that has reinforced investor concern about the independence of the U.S. central bank.

Benchmark copper CMCU3 on the London Metal Exchange traded flat at $9,796 a metric ton in official rings from an earlier $9,862, the highest since August 13.

Copper drew support from disruption to supply in Chile, where the mining regulator Sernageomin has imposed additional requirements on Codelco for resuming operations in areas affected by a deadly collapse at its El Teniente copper mine.

Codelco, the world's largest copper producer, has cut its copper forecast for the year as a result of the incident.

On the technical front, initial support for copper is at the 50-day moving average at $9,754 followed by the 21-day moving average at $9,731.

Elsewhere, traders expect zinc prices to be supported by sliding inventories in LME-approved warehouses, which at 65,525 have dropped 66% since the middle of April MZNSTX-TOTAL.

Cancelled warrants, or metal earmarked for delivery, indicate another 23,725 tons are due to leave the LME system.

Worries about supplies on the LME market have narrowed the discount for the cash zinc contract over the three-month forward CMZN0-3 to around $4 a ton from levels above $40 in April.

Three-month zinc CMZN3 was down 0.8% at $2,795.5 a ton, aluminium CMAL3 fell 0.7% to $2,607, lead CMPB3 was little changed at $1,994.5, tin CMSN3 rose 0.3% to $33,925 and nickel CMNI3 gained 0.3% to $15,140.

Metals markets are waiting for clues on demand prospects in the world's biggest consumer of industrial metals, China, from surveys of purchasing managers in its manufacturing industry.