U.S. rate hike prospects weigh on LME aluminium prices

Aluminium prices, after holding ground for a month, took a nose-dive on London Metal Exchange, on Tuesday, while other base metals touched one-week lows as uncertainty swept across markets ahead of the U.S. central bank meeting and as worried investors took guard by selling to book profits from a recent commodity rally.

The U.S. Federal Reserve, in its two-day meeting which starts on Tuesday, is expected to keep interest rates unchanged this week; however, analysts say there are possibilities that some policymakers would be arguing for a rate hike for the short term.



"These market worries about the Fed meeting are justified. Our economists think markets have become too complacent about the outlook for U.S. monetary policy," said analyst Carsten Menke at Julius Baer in Zurich.

"After we've seen some positive economic data out of the United States, rate hike expectations could be brought forward, which would support the dollar and in turn weigh on metals prices."

Three month aluminium on LME dropped 0.8 per cent to close at $1,592 a tonne, the weakest since June 24.