"That has been the big driver, although clearly we were already in an uptrend, anyway."
Copper finished open outcry trade at $3,242 a tonne, up $32 from Monday's kerb close but off its new peak of $3,260.
Copper scored an all-time high of $3,280 in January 1989.
The dollar fell against key currencies, hit by market worries that central banks were diversifying reserves out of US assets.
South Koreas's central bank said on Monday it planned to diversify its reserves, which are the world's fourth largest, into a greater variety of currencies.
Tight supplies in all base metals, particularly in copper and zinc, have encouraged fund buying on the LME in recent weeks.
Although copper stocks at the exchange have risen from their lows of January, warehouse stocks are still significantly less than the four weeks of supply generally recognised as critical.
"We believe that copper prices have the potential to spike higher in this environment, particularly if there is some mine failure or significant supply interruption," John Meyer, analyst at Numis Securities Ltd, said in a note.
Zinc, which has jumped 10 percent this year, ended $23 firmer at $1,391, off its 7-1/2-year high of $1,397 scored earlier.
The price of this anti-corrosive metal was further bolstered after Belgium's Umicore announced plans to cut its annual zinc production by 130,000 tonnes to focus on production of specialty products.
"It (the Umicore cutback) doesn't mean much to the market as the zinc will simply be produced somewhere else. There aren't enough concentrates for all the smelters, so some have to shut," said Graham Deller of consultants CRU International.
Aluminium rose two percent as it strived to reach 10-year highs above $1,973. Three months finished $41 higher at $1,965 a tonne, just off a seven-week high of $1,968.
Lead bucked the trend to finish $5 weaker at $976, while nickel crept up $25 to $15,700 and tin was untraded.