METALS-Copper hits one-week low ahead of US Fed rate decision

By Polina Devitt

LONDON, Sept 17 (Reuters) - Copper prices hit a one-week low on Wednesday as traders trimmed positions ahead of a decision on U.S. interest rates from the Federal Reserve, while demand from top metals consumer China was muted by the recent copper rally.

Benchmark three-month copper CMCU3 on the London Metal Exchange fell 1.3% to $9,999 a metric ton by 1600 GMT, remaining above the 21-day moving average, which supports it at $9,912.

The metal, used in power and construction, hit $10,192.50, its 15-month high, on Monday.

"China has been on the copper offer this week," said Alastair Munro, senior base metals strategist at Marex. "But it has really been an absence of any systematic bid and even bearish mean reversion sell signals which have triggered weakness across the complex."

China's copper production rose 15% year on year in August, state data showed on Wednesday.

Traders await clarity from the Fed not just on the expected rate cut but also on the trajectory of future policy, said Neil Welsh, head of metals at Britannia Global Markets.

"With the dollar already down around 10% year-to-date and labour data softening, traders are looking for signals that tonight's cut could be the first in a series," he added.

Among other LME metals, aluminium CMAL3 lost 1.1% to $2,686 a ton.

It hit a six-month high of $2,720 on Tuesday, when the premium of the cash aluminium contract against the three-month contract widened to $16 a ton, the highest since March. That indicated tightness in the LME system during the current settlement week, when short position holders had to cut or roll over their contracts.

This premium fell to $2 a ton on Wednesday, while the premium for buying aluminium tomorrow and selling it the day after – known as tom-next MALT-0=LX – vanished to zero from Tuesday's $13 a ton.

There was one long position holder with more than 40% of LME September futures' open interest alongside several short positions, according to the LME data. 0#LME-FBR

LME zinc CMZN3 shed 1.7% to $2,941, lead CMPB3 rose 0.2% to $2,013, tin CMSN3 slid 1.4% to $34,380, while nickel CMNI3 fell 0.1% to $15,405.