* Euro falls vs dollar after gloomy euro zone data
* China HSBC flash PMI rises but Q1 momentum seen muted
* U.S. existing home sales touch three-year high
By Harpreet Bhal
LONDON, March 21 (Reuters) - Copper fell on Thursday as the dollar rose versus the euro and investors moved their money out of assets perceived as risky because of worries about a possible financial collapse in Cyprus.
However, data from top metal consumer China showing its vast manufacturing sector picked up in March limited copper's losses. A preliminary survey of factory managers showed solid first-quarter growth in the world's second-largest economy.
"It shows that economic activity in China has picked up after the new year holiday and we expect to see improved economic figures in coming months lending support to prices," said Daniel Briesemann, analyst at Commerzbank.
Three-month copper on the London Metal Exchange, untraded at the close, was last bid at $7,590 a tonne from a close of $7,620 on Wednesday. It is still comfortably off the seven-month low of $7,486.25 hit on Tuesday.
The HSBC Purchasing Managers' Index for China rebounded to 51.7 in March, from 50.4 in February, on the back of stronger new orders and production growth.
"This implies that the Chinese economy is still on track for gradual growth recovery. Inflation remains well behaved, leaving room for Beijing to keep policy relatively accommodative in a bid to sustain growth recovery," HSBC said in a client note.
Weighing on prices, however, was a drop in the euro which widened losses against the dollar, hitting New York session lows, on a combination of upbeat U.S. data and fresh negative headlines on Cyprus.
U.S. reports showed existing home sales in February hitting a three-year high, further bolstering the sector's recovery and boosting the dollar as a result. Data also showed that manufacturing in the U.S. mid-Atlantic region expanded for a second straight month in March.
A strong dollar makes commodities priced in the U.S. unit more expensive for holders of other currencies.
Cyprus' uncertain financial condition remained on the radar, with the European Central Bank giving the country until Monday to raise billions of euros to clinch an international bailout or face losing emergency funds for its crippled banks and inevitable collapse.
Helping fuel some bullish sentiment in copper was news that Codelco, the world's No. 1 producer, has been unable to export some metal from its massive mines due to a strike by port workers in northern Chile.
That alongside the HSBC flash PMI, a likely resolution to the Cyprus issue and a favourable arbitrage was helping spur copper imports, a trade house analyst in Shanghai said.
"We have seen some aggressive consumer buying over the last 5-10 days. I feel it's not 100 percent related to the strong demand pick up yet, it's more slow restocking because of the lower flat price, and people are afraid the price will rebound," he said.
Latest data from the International Copper Study Group showed the world refined copper market deficit deepened last year to 340,000 tonnes, from 216,000 tonnes in 2011, due to constrained growth in refined production and a surge in usage in China.
In other metals, aluminium closed at $1,928 from Wednesday's close of $1,939 while zinc closed at $1,934 from $1,931.
Data showed zinc stocks in LME-registered warehouses fell 3,900 tonnes, with cancelled warrants, material earmarked for delivery, at 60.11 percent of total stock.
Tin closed at $22,595 from $22,600 and lead at $2,286 from a close of $2,172.5 on Wednesday. Nickel closed at $16,895 from $16,810.
Growth in global production of primary nickel this year is set to outpace consumption growth, increasing the surplus in the global market, the Lisbon-based International Nickel Study Group (INSG) forecast.