The dollar rose to a new 14-year high against a basket of six main currencies after US manufacturing activity grew by more than expected in November, making dollar-denominated assets such as copper more expensive for holders of other currencies. Weakness in copper, usually viewed as a benchmark for other metals, hit aluminium, which touched its lowest in more than two months at $1,676 a tonne before closing down 0.4 percent at $1,687. Nickel closed at its lowest since September 19 at $9,910.
Economic sentiment remained bullish for the world's largest economy on prospects of rising US interest rates and expectations that President-elect Donald Trump will provide a boost to public spending and growth. Copper rose 20 percent to more than $6,000 a tonne after the US election in November, its highest since June 2015 and the biggest monthly rise since 2006. The metal started the day on a stronger note, boosted by a 10,400-tonne drop in LME inventories and after data showed that Chinese factory activity picked up by more than expected in December on higher demand.
"There is good support for base metals from economic data ... that the PMI has stabilised above 50 shows that the economy has at least stabilised and growth from now will be dependent on more stimulus," said Societe Generale analyst Robin Bhar. China's economic growth could slow to 6.5 percent this year from about 6.7 percent in 2016, a government-run think tank said on Tuesday while suggesting that a one-off devaluation could help to stabilise the yuan currency.
"We have the non-farm payrolls on Friday, which should confirm that the US economy is healthy, so this week's data should justify the Fed's recent interest rate increase," Bhar said. The Chinese New Year holiday in the first quarter of 2017, however, could hit manufacturing activity and cap the metal's upside temporarily, traders said. In other metals, lead closed unchanged at $2,015, zinc finished 2.1 percent down at $2,522 and tin was bid 0.8 percent lower at $20,950.