New York (Platts)--20Jan2010/557 pm EST/2257 GMT

Copper futures on the COMEX division of the New York Mercantile Exchange plunged Wednesday as the dollar strengthened and concerns arose over reports of the Chinese trying to tighten their monetary policy.

March, the active contract, was trading at 334.50 cents/lb, down 10.20 cents from Tuesday's settlement, at 11:41 am EST (1641 GMT). It was off an earlier high of 347.00 cents.

The US dollar strengthened as the day went on, opening at about $1.420 versus the euro before surpassing $1.410 "as fallout from the Massachusetts Senate rate continues to reverberate through the currency markets," MF Global said in a report. "Given this strength, oil has already given up yesterday's entire advance, and metals have given up a good chunk of yesterday's gains as well. Also troubling the markets somewhat today was overnight news out of China that authorities have told some banks to limit lending. The markets interpreted the move as more evidence of further modest tightening, leading to the selling we saw in Asia."

Said one US investment bank analyst: "I think it's a combination of a couple of things: the Chinese trying to tighten their monetary policy, which has hit commodities, mainly base and energy commodities particularly hard, and the dollar being up against the euro. But I think this is a broader commodities story, rather than a precious metals one specifically," he added, noting that US equity markets were also down.

In addition, the report cited World Bureau of Metals Statistics saying that the global copper market was in a surplus by 191,000 mt in January to November of 2009, down from 205,000 mt in the same period of 2008.

Overnight, copper stocks in LME-registered warehouses had their second draw in three days after going almost three months without one. They fell 100 mt to 526,650 mt.

A Commerzbank report said that "inventories may potentially see a further build-up, as Codelco, for instance, the largest copper producer globally, expects that production volumes at Radomiro Tomic Mine will remain at the current high levels. Last year, this mine had already posted a record output."

--Michael Schneider, michael_schneider@platts.com