METALS-Copper edges down as dollar soars

Thu Sep 5, 2013 12:35pm EDT

* Dollar higher vs euro, basket of currencies

* U.S. private sector adds 176,000 jobs in August

* Tin hits one month high on Indonesian shipments halt

By Harpreet Bhal and Silvia Antonioli

LONDON, Sept 5 (Reuters) - Copper prices edged slightly lower on Thursday, as the dollar strengthened but losses were capped by expectations that a revival in demand from top consumer China will gather pace.

Three-month copper on the London Metal Exchange was untraded at the close but was last bid at $7,108 down slightly from a close of $7,134 on Wednesday when the metal used in power and construction fell close to 2 percent.

Weighing on the metal was a stronger dollar, which rose to a seven-week peak against the euro after European Central Bank President said the bank's Governing Council expects key ECB interest rates to remain at present or lower levels for an extended period.

A stronger dollar makes commodities priced in the U.S. unit more expensive for holders of other currencies.

The dollar has been supported in recent weeks by expectations that the U.S. Federal Reserve could begin to withdraw stimulus measures as early as this month due to signs of improvement in the economy.

This view was bolstered by solid U.S. jobs and service sector data on Thursday.

"You have a Fed that is poised and ready to start tapering and I think they want to go ahead with this as they feel they are in danger of expanding their balance sheet too much," said Nic Brown, head of commodities research at Natixis.

"It may well be possible to give the market some reassurance in the form of stronger forward guidance to offset withdrawal of some of the liquidity being injected currently through Q.E."

Investors are expected to closely monitor key U.S. jobs figures, due on Friday, for further evidence of the pace of recovery in the world's largest economy.

The U.S. economy expanded at a "modest to moderate" pace in most of the country between early July and late August, according to a Federal Reserve report that was just strong enough to reinforce the prospect of a pullback in monetary stimulus.

CHINA SUPPORT

Supporting prices were expectations of a rebound in demand from China, where economic data has been pointing to a recovery in the world's second largest economy.

Recent figures showed growth in China's services sector hit a five-month high in August, underpinned by optimism over government policy measures.

"We've had some decent PMIs around the world in the last week, Chinese numbers are now looking significantly more positive, the U.S. numbers still look decent and there have been some pleasant surprises in Europe, so generally the economic data is looking a little more solid," Brown said.

Benchmark tin prices rose to a one-month high at $22,299.50 a tonne after Indonesia's No. 1 tin exporter, state-backed PT Timah, said it halted shipments and declared force majeure, blaming new trading rules and dealing a blow to government efforts to boost the nation's influence in commodity markets.

It then closed at $22,050, up from a close of $21,870 on Wednesday.

The shortfall in supply has helped drive up cash prices to a $125 premium against the benchmark three-month contract during Wednesday's evaluation, the highest level since August 2010.

Aluminium closed at $1,798 from $1,790, while zinc finished at $1,870 from $1,874. Lead closed at $2,124 from Wednesday's close of $2,142 and nickel at $13,730 from $13,680.

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