* Copper hits lowest level since July 2010
* China credit squeeze, slower economy may hurt demand
* Freeport resumes some output at world's No.2 copper mine
By Susan Thomas and Harpreet Bhal
LONDON, June 24 (Reuters) - Copper slumped to its lowest level in almost three years on Monday, pressured by a firmer dollar and concerns that a possible liquidity squeeze could hurt the economy and demand in top metals consumer China.
Copper was also hit by the announcement last week of a timeframe for the U.S. Federal Reserve to scale back its stimulus programme, which has boosted market liquidity and helped commodities touch record levels.
Three-month copper on the London Metal Exchange touched a session low of $6,613 a tonne, its lowest since July 2010.
The metal closed at $6,670 a tonne, down more than 2 percent from a close of $6,818 on Friday. It fell nearly 4 percent last week in its biggest weekly loss since mid-April.
"In line with the majority of the commodity complex, base metal prices have come under significant pressure over the past week," Barclays analyst Gayle Berry said.
"The broad risk-off move has been driven largely by macro developments, essentially a combination of continued weakness in Chinese economic data and a shortened time horizon for Fed tapering expectations."
An additional worry in China, the world's biggest consumer of base metals, was a potential cash crunch.
China accounts for around 40 percent of global refined copper demand.
China's central bank said on Monday the overall liquidity in the financial system was at a reasonable level after interest rates for short-term funds last week rose to extraordinary levels as big commercial banks held back on lending in the interbank market.
The overnight repo rate, a measure of funding costs in China's interbank market, peaked at near 12 percent last Thursday.
"With Shibor still at elevated levels ... financial assets were further sold across the board," Marex Spectron analyst George Adcock said.
China shares suffered their biggest daily loss since August 2009 on Monday, with financials hammered on worries the central bank would keep money tight and that economic growth could slow sharply.
A stronger dollar also hurt copper and other commodities priced in dollars, including oil and gold, by making them more expensive for holders of other currencies.
Also dampening copper was the resumption of operations at the world's No.2 copper mine. Freeport McMoRan Copper and Gold Inc has restarted some operations at its Grasberg mine in Indonesia, ramping up output six weeks after a tunnel collapse that killed 28 people.
"Production had been suspended following the serious mine accident in mid-May. That said, it is likely to take some weeks yet before the original production rates are achieved again," analysts at Commerzbank said.
Zinc ended at $1,825 from $1,844 at the close on Friday, while tin ended at $19,575 from $20,000 and nickel was $13,630 from $14,075. Lead ended at $1,995 from $2,020 on Friday.
Aluminium, untraded at the close, was bid at $1,771 from a close of $1,793 on Friday.