* Dollar’s weakness draws in copper buyers
* Market still pondering impact of Trump presidency
* Future of Alcoa Australia aluminium smelter in focus (Updates prices)
By James Regan
SYDNEY, Jan 18 (Reuters) - Buying on the back of a weaker dollar tipped London copper into positive territory in early on Wednesday, reversing a slide overnight on uncertainties over U.S. President-elect Donald Trump’s economic programme.
Three-month LME copper was up 0.4 percent at $5,778 a tonne by 0700 GMT, after ending nearly 2 percent lower overnight.
A recent sell-off of the greenback initially deepened as U.S. traders returned from a long weekend to widespread weakness after Trump, whose inauguration takes place on Friday, said the greenback’s strength against the Chinese yuan “is killing us”.
The dollar later took a breather as investors awaited U.S. Federal Reserve Chair Janet Yellen’s speech on monetary policy.
But the currency’s respite was too little to turn copper sentiment negative, according to traders.
A weaker dollar makes dollar-denominated assets such as copper cheaper for holders of other currencies. The dollar index against a basket of major currencies is down more than 2 percent since Jan. 1.
Copper and other base metals initially gained traction on the back of Trump’s November election win amid expectations that spending on rebuilding U.S. infrastructure would soar, soaking up more industrial raw material. Copper is widely used in construction.
Analysts expect copper to continue to reflect such expectations, at least through the first few months, as Trump settles into the White House and his economic blueprint takes shape.
“The planned economic programme of the new U.S. administration will likely become clearer over the next few months, as will the pace of the Chinese economy expansion,” S&P Global said in a note after lifting its 2017 copper price forecast by 4.5 percent to $5,705 a tonne. “These are two key variables for copper price dynamics.”
The metal hit its highest since early December early on Monday before recoiling.
Falling LME-registered copper stocks MCU-STOCKS - down another 1,625 tonnes on Monday, bringing the decline so far this year to 11 percent - were also lending price support.
Elsewhere in LME metals, nickel was 0.4 percent firmer at $10,200 a tonne, while aluminium was mostly flat at $1,797 a tonne.
Traders said they were closely watching negotiations between Alcoa and the Australian government over allocating public funds to help keep the 300,000-tonnes-per-year Portland aluminium smelter near Melbourne in operation.
Three-month zinc was down 1 percent at $2,743 a tonne.
The most-traded copper contract on the Shanghai Futures Exchange was down by 1.5 percent at 46,600 yuan ($6,807) a tonne.
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Most active ShFE nickel
Three month LME tin
Most active ShFE tin ($1 = 6.8457 Chinese yuan) (Reporting by James Regan; Editing by Kenneth Maxwell and Amrutha Gayathri)