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Oct 3 (Reuters) - London zinc prices fell on Tuesday as a firm dollar made greenback-priced metals expensive to holders of other currencies, while an expected supply increase is likely to weigh on further price rallies.
Three-month zinc on the London Metal Exchange CMZN3 dropped 1.8% to $2,554 a ton at 0453 GMT, retreating from its highest since May 10 of $2,675 a ton hit in the previous session. The contract surged 11% in the third quarter.
Combined zinc inventories in LME and SHFE warehouses eased in the second and third quarters, but still rose 165% year-to-date to 134,904 tons, exchange data showed. MZNSTX-TOTAL, ZN-STX-SGH
The weekly declining rate has been slowing in recent weeks, according to the data.
The dollar held on to fresh highs on views that the Federal Reserve will keep interest rates higher for longer.
"We expect prices to remain relatively stable over the coming months, as gradually improving mined and refined output helps to reduce market tightness... There are tentative signs that European smelters could begin increasing production again in 2023," Fitch Solutions analysis unit BMI said in a report.
LME copper CMCU3 shed as much as 0.6% to $8,004.50 per metric ton, the lowest since May 26, while lead CMPB3 hit a five-month low of $2,137 a ton.
Copper inventories in LME-registered warehouses MCUSTX-TOTAL rose to 169,300 tons, the highest since May 2022. LME lead stockpiles MPBSTX-TOTAL rose to the highest since June 2021 to 78,325 tons.
LME aluminium CMAL3 declined 0.5% to $2,309 while nickel CMNI3 rose 0.3% to $18,800 a ton and tin CMSN3 climbed 1.7% to $23,900.
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(Reporting by Mai Nguyen in Hanoi; Editing by Sohini Goswami)
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