By Anna Stablum April 8 (Bloomberg) -- Copper fell for a second day in London as the dollar strengthened and investors judged that a rally to a 20-month high was excessive. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, rose for a third day, advancing as much as 0.6 percent. Gains by the dollar make raw materials priced in the currency more expensive in terms of other monies. The euro dropped on concern about stagnant European economies and the possibility of a Greek default. “Prices have gone ahead of themselves,” Alex Heath, head of industrial-metals trading at RBC Capital Markets in London, said in a report. “The whole political instability and nervousness surrounding Greece make people feel that commodity prices are dangerously high.” Copper for delivery in three months fell $100, or 1.3 percent, to $7,845 a metric ton at 9:59 a.m. on the London Metal Exchange. The contract this week touched $8,010, the highest level since July 31, 2008. May-delivery copper lost 1.1 percent to $3.558 a pound on the Comex in New York. All of the six main metals traded on the LME slid, led by zinc. The euro fell before a European Central Bank meeting at which policy makers are forecast to keep interest rates at a record low to spur growth, damping demand for the region’s assets. The ECB will hold its main refinancing rate at 1 percent at the conclusion of its meeting today, according to all 62 economists surveyed by Bloomberg. Inventories Climb Gross domestic product in the 16-nation euro region was unchanged in the fourth quarter compared with the third, the European Union’s statistics office said yesterday. Copper dropped as inventories tracked by the LME climbed and bookings to remove metal from warehouses dropped. Stockpiles swelled 0.1 percent to 511,250 tons as bookings, known as canceled warrants, fell 4.2 percent to 16,650 tons. Canceled warrants are down by more than half from this year’s high of 35,975 tons. Supply of the metal will lag demand starting in the fourth quarter as miners fail to keep pace with consumption, GFMS Ltd. said. The market last recorded a full-year supply deficit in 2007, according to the London-based researcher. Nickel for three-month delivery on the LME fell 1.6 percent to $24,331 a ton. Prices have gained 31 percent this year, the most among the exchange’s six main metals, giving producers an incentive to restart output. The metal may drop below $20,000, RBC’s Heath said. Finnish Mine “We are looking for weaker prices in the second half of the year,” he said. “Unless they can get hedges on, at these kind of levels it is hard to see them staying open, so it does look a bit premature that all these mines are rushing to come into the market.” Vancouver-based Belvedere Resources Ltd. said yesterday it will recommence activity at a Finnish nickel mine. Mincor Resources said today it’s looking into reopening an Australian mine where activity was suspended in December 2008. LME-tracked warehouses hold 155,670 tons of nickel, up 46 percent over the past year. Aluminum shed 0.9 percent to $2,330 a ton and zinc fell 1.7 percent to $2,360 a ton. Lead declined 1.2 percent to $2,261.75 a ton and tin slipped 0.1 percent to $18,549 a ton. --With assistance from Matt Craze in Santiago. Editors: Dan Weeks, John Deane. To contact the reporter on the story: Anna Stablum in London at astablum@bloomberg.net. To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net.

Source