3 Min Read
* Copper poised for small monthly gain of 1.7 pct
* Dollar drops to 5-week low vs basket of currencies
* Coming up: U.S. pending home sales at 1400 GMT
By Harpreet Bhal
LONDON, July 29 (Reuters) - Copper steadied on Monday, after falling to its lowest level in nearly three weeks, as the dollar fell but further gains were capped by uncertainty about growth in top consumer China.
Three-month copper on the London Metal Exchange fell to its lowest level since July 10 at $6,820 a tonne in intraday trade. It rebounded to trade at $6,882 a tonne in official rings, up from a last bid of $6,860 on Friday.
The metal is headed for a small monthly gain of 1.7 percent for July following losses of nearly 8 percent in June.
Investors are watching for official data this week from China that gauges activity in its vast manufacturing sector. Last week an initial reading from HSBC showed factory activity at its slowest in 11 months in July.
China accounts for around 40 percent of global copper demand.
"The bigger moves over the next couple of months will probably be on the downside. There is a risk of Chinese imports falling off again. And we have a lot of new supply set to enter the market," said Gayle Berry, an analyst at Barclays.
She added, however, "There is still a small chance of a break higher in copper because the market is very short and the fundamental copper data is better than people realise."
Helping support copper prices was the dollar's fall to a five-week low against a basket of currencies on expectations the U.S. Federal Reserve intends to keep interest rates low for some time. The Fed starts a two-day meeting on Tuesday.
The U.S. payrolls report will be released on Friday, and the forecast is for 185,000 jobs to have been added in July and a dip in the jobless rate to 7.5 percent. A strong report would support the case for the Fed to start rolling back stimulus.
If the Fed confirms it will reduce its bond purchases by September, that could fuel another commodities sell-off, while a further delay could spur a rally.
"Given the recent run of economic data, there seems little risk of the Fed suggesting that it will be any more aggressive on tapering than current market expectations," Ric Spooner, chief market analyst CMC Markets in Sydney, said in a note.
"The risk is all the other way, with potential for the Fed to emphasise that it won't reduce its asset-buying program unless unemployment continues to fall."
In industry news, Rio Tinto has agreed to sell its majority stake in the Northparkes copper mine in Australia for $820 million to China Molybdenum Co Ltd, a Chinese firm making its first foray offshore and into copper.
In other metals, aluminium traded at $1,803 in official rings, from a last bid of $1,794 on Friday. Zinc traded at $1,846 from $1,855 and lead was at $2,060 from $2,050.
Tin was bid at $19,400 from $19,450 and nickel was bid at $13,700 from $13,850.