Copper prices under pressure from stronger dollar

Investing.com - Copper prices declined on Tuesday, as traders continued to monitor the direction of the U.S. dollar and mull the timing of a Federal Reserve rate hike.

On the Comex division of the New York Mercantile Exchange, copper for July delivery shed 1.2 cents, or 0.42%, to trade at $2.799 a pound during European morning hours. Prices held in a range between $2.794 and $2.833.

Futures were likely to find support at $2.789, the low from May 22, and resistance at $2.855, the high from May 22.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.75% at 97.18 early Tuesday, the strongest level since April 27.

A stronger dollar reduces demand for raw materials as an alternative investment and makes dollar-priced commodities more expensive for holders of other currencies.

The dollar strengthened broadly after Federal Reserve Chair Janet Yellen reiterated Friday that the central bank still expects to start raising interest rates later this year if the economy continues to improve as expected.

She also attributed a slowdown in first quarter growth to "transitory factors", including a harsh winter.

The greenback received an additional boost after data showed that underlying inflation in the U.S. rose for a third straight month in April, supporting the case for a rate hike later this year.

Meanwhile, the euro fell below the 1.09-level against the dollar as the prospect of a Greek default continued to weigh on sentiment.

Athens has warned that the country would be unable to make a €305 million payment to the International Monetary Fund due on June 5 if a cash-for-reforms deal with its international lenders is not reached by then.

Elsewhere, gold futures for August delivery fell $8.90, or 0.74%, to trade at $1,196.00 a troy ounce, while silver futures for July delivery tumbled 25.3 cents, or 1.48% to trade at $16.79 an ounce.

Investors were turning their attention to U.S. data on durable goods orders, new home sales and consumer confidence later Tuesday for fresh indications on the strength of the economy and the timing of a U.S. rate increase.

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.