Investing.com - Copper prices tumbled to five-week lows on Thursday, as the U.S. dollar rallied after Federal Reserve Chair Janet Yellen pointed to a possible December interest rate hike.
Copper for December delivery on the Comex division of the New York Mercantile Exchange slumped 3.6 cents, or 1.56%, to trade at $2.286 a pound during morning hours in London. It earlier fell to $2.285, the lowest since October 2. A day earlier, copper prices dipped 0.8 cents, or 0.34%.
Meanwhile, three-month copper on the London Metal Exchange dropped 1.37% to $5,059.50 a metric ton, a level not seen since September 29.
The U.S. dollar jumped to a 12-week high against its major counterparts after comments by Fed Chair Yellen bolstered expectations for a rate hike in December.
Testifying before the House Financial Services Committee on Wednesday, Yellen described the U.S. economy as "performing well" and an interest rate hike in December as a "live possibility" if upcoming economic data were supportive.
A stronger dollar reduces demand for raw materials as an alternative investment and makes dollar-priced commodities more expensive for holders of other currencies.
Elsewhere in metals trading, gold prices struggled near seven-week lows, as investors continued to cut holdings of the precious metal amid expectations the Federal Reserve will raise interest rates at its next meeting in December.
Investors now looked ahead to key U.S. data later in the day for further indications on the strength of the economy and the likelihood of a near-term rate hike.
The U.S. is to release a weekly report on initial jobless claims at 8:30AM ET Thursday, as well as data on nonfarm productivity and unit labor costs.
Market players are also focusing on Friday's U.S. nonfarm payrolls report. The consensus forecast is that the data will show jobs growth of 180,000 in October, following an increase of 142,000 in September, while the unemployment rate is forecast to hold steady at 5.1%.
A strong nonfarm payrolls report was likely to add to speculation over when the Federal Reserve will begin to raise interest rates, while a weak number could undermine the argument for an early rate hike.
The timing of a Fed rate hike has been a constant source of debate in the markets in recent months. The U.S. central bank has one more scheduled policy meeting before the end of the year in mid-December.
Gold had rallied in October as concerns over a global economic slowdown led by China and its impact on U.S. growth prospects had prompted market participants to push back expectations for a rate increase to March 2016.
But the Fed's hawkish statement last week forced market players to readjust expectations for higher interest rates to as early as December, triggering a sell-off in the bullion market.
Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.