(Bloomberg) -- Copper slipped to the lowest since May as traders assessed continued strength in the dollar and bond yields, as well as low liquidity during a weeklong holiday in top consumer China. 

A rally in the greenback — driven by bets the Federal Reserve will maintain tighter monetary policy than its peers — has pressured commodities priced in the currency. While a gauge of the dollar softened on Wednesday, it was near the highest level since November.

US companies added the fewest number of jobs since the start of 2021 in September, suggesting labor demand in several industries is slowing. Private payrolls rose 89,000 last month after climbing 180,000 in August, according to the survey from the ADP Research Institute in collaboration with Stanford Digital Economy Lab. 

Copper is at a key juncture after spending much of 2023 drifting lower. Tighter Fed policy and a disappointing rebound in the Chinese economy after a year of lockdowns have both weighed on the metal, though demand related to the energy transition and low inventories have helped prevent a rapid decline in the price. 

However, stockpiles at the LME have been steadily expanding in a sign that supply is now starting to run ahead of demand in the spot market. They still remain at historically low levels.

“Copper is getting hit with a one-two punch as inventories rise and as growth concerns follow this global bond market selloff,” said Ed Moya, senior analyst at Oanda.

The red metal may encounter more selling if it dips below the $7,865 a ton, TD Securities commodity strategist Daniel Ghali said in a note. 

The global refined copper market is expected to be in a small deficit this year, according to the International Copper Study Group. It sees the market to flip into a 467,000-ton surplus in 2024. 

Copper traded on the London Metal Exchange was down 1% to $8,006.50 a ton as of 5:15 a.m. in New York. Chinese markets are closed for the Golden Week holidays.

--With assistance from Eddie Spence and Annie Lee.

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