Copper prices extended gains Wednesday, driven by a tighter supply outlook and a weakening dollar, even as Chinese buying activity slowed ahead of the Lunar New Year holiday. The industrial metal's rally reflects growing concerns about supply constraints in key producing regions, with traders betting that reduced Chinese demand during the holiday period will be offset by broader market dynamics. The dollar's weakness against major currencies has made dollar-denominated commodities more attractive to international buyers, providing additional support for copper prices. This comes as the Lunar New Year approaches, traditionally a period of reduced industrial activity in China, the world's largest consumer of copper.

Market participants are closely watching supply developments, particularly in major producing countries where labor disputes and operational challenges have raised concerns about potential disruptions. The combination of supply-side pressures and currency dynamics has created a favorable environment for copper bulls, despite the seasonal slowdown in Chinese demand. Analysts note that the current price action suggests investors are pricing in continued tightness in the physical market, with inventories at multi-year lows in key storage hubs.

The ongoing rally in base metals, led by copper, underscores the market's focus on supply fundamentals rather than short-term demand fluctuations. With the dollar expected to remain under pressure and supply concerns persisting, copper's upward momentum could continue in the near term, barring any significant shift in macroeconomic conditions or unexpected supply increases.