Base metals prices on the Shanghai Futures Exchange were broadly down during Asian morning trading on Wednesday July 4, with copper prices sliding to a near two-month low amid weakness in the yuan versus the dollar and an uptick in trade tensions between the United States and China.

The most-traded August copper contract on the SHFE slid to 50,840 yuan ($7,630) per tonne as at 10.06am Shanghai time, down by 590 yuan per tonne or 1.2% from Tuesday’s close.

A stronger dollar versus a weakened yuan has been a key driver behind the weakness of red metal prices over the past few weeks.

The dollar index has hit fresh highs in recent days, reaching 95.14 on July 2, before softening on muted appetite from investors ahead of the Independence Day holiday in the US on Wednesday.

Meanwhile, the persistent depreciation of the yuan against the dollar has further dampened sentiment toward the base metals in China.

According to exchange rate website, $1 was worth 6.66 yuan on Wednesday, compared with 6.45 yuan two weeks ago.

“The weakness in the [yuan] has been a contributing factor to the recent weakness in base metals. In fact, the negative correlation between copper and USD/CNY exchange rate has reached its highest level since 2012,” ANZ Research noted on Wednesday.

In addition, an uptick in US-China trade tensions overnight added to the murky outlook for the base metals, further denting market sentiment.

“Overnight a Chinese court issued a temporary injunction banning [US-headquartered] Micron Technology from selling its products in the semiconductor market there…It comes after the US moved to block China Mobile from entering its telecommunications market on national security grounds,” ANZ Research said.

“Market participants remain concerned about the escalation in US-China trade tensions. Additionally, [London Metal Exchange] copper prices have breached $6,500 per tonne and are likely to trend toward $6,350 per tonne,” Citic Futures Research said on Wednesday.

Meanwhile, aluminium was the only base metal on the SHFE to record a gain – albeit a marginal one – during the early Asian session on Wednesday.

The most-traded August aluminium contract price on the SHFE edged up to 14,045 yuan per tonne as at 10.06am Shanghai time, up 20 yuan per tonne or 0.1% from Tuesday’s close.

Light metal prices have been supported by the continuous decline in SHFE stocks, despite the aluminium market being in its traditionally weak period for consumption.

Deliverable aluminium stocks at SHFE-approved warehouses fell for a seventh consecutive week in the week to June 29, with inventories declining by 5,443 tonnes to 936,194 tonnes – a three-month low.