NEW YORK/LONDON Copper fell on Friday, largely tracking a volatile euro versus the dollar, but cut its losses later in the day on hopes that European policymakers were perhaps gaining an upper hand in containing the region's long-standing debt problem.
Copper trimmed its early losses and managed to close in the upper half of the day's trading range after Reuters reported the European Central Bank (ECB) is considering setting yield band targets under a new bond-buying program.
"I think that gave us a little bit of a lift ... some ideas about Europe being a little bit better," said Sterling Smith, commodity strategist at Citibank's Institutional Client Group in Chicago.
Sentiment also improved after U.S. Federal Reserve Chairman Ben Bernanke said in a letter to a congressional oversight panel that the Fed has room to deliver additional monetary stimulus to boost the U.S. economy.
COMEX copper for September delivery fell 0.90 cent to settle at $3.4835 per lb, dealing between $3.4560 and $3.4945. Despite the late-week loss, copper prices posted their third straight weekly gain.
COMEX volumes picked up Friday to stand at 61,700 lots in late New York trade, nearly 40 percent above the 30-day average, according to preliminary Thomson Reuters data.
On the London Metal Exchange (LME), three-month copper fell $44.50 to end at $7,640 a tonne, backing away from the previous session's one-month high of $7,720.50.
Fed officials gave mixed messages on Thursday. With one playing down the odds of imminent bond buying and another seeing a lot of reasons for more easing, investors scaled back their expectations for economic stimulus.
"After the initial thoughts from the Fed statement yesterday, we saw some short-covering (in metals markets) and that has run its course now," Gayle Berry, an analyst at Barclays Capital, said.
"We're not at the point yet where the market's views have changed to add fresh longs as there are still negative headlines out there."
U.S. data on Friday also sent mixed messages. New orders for long-lasting U.S. manufactured goods surged in July, but a second straight month of declines in a gauge of planned business spending pointed to a slowing growth trend in the factory sector.
Trading volume was light due to summer holidays in the northern hemisphere, when many plants shut for annual maintenance.
Reflecting a lack of conviction about copper's short-term price direction, the open interest in the LME copper contract dropped to a 5-1/2 year low.
"It'll take a lot of conviction to get fresh longs to come in at this point, so we will be facing pressure from the shorts today," said an analyst with an international trading firm who declined to be identified as he was not authorized to speak to the media.
Concerns about the euro zone debt crisis still has kept sentiment cautious following news that Spain was in talks with euro zone partners over sovereign aid, although it has not made a final request for a bailout.
Benchmark tin jumped $950, or close to 5 percent, to end at its highest since mid-May at $20,900 a tonne on concerns about a supply shortfall from Indonesian producers.
A stoppage by tin miners in Indonesia because of weak global prices has increased to encompass over 90 percent of smelters, leading shipments to decline by more than half from the world's top exporter of the metal.
Looking further ahead to the outlook for the red metal, investors are keen to see signs of further stimulus action from China to help spur a pickup in demand in the country that consumes around 40 percent of global refined copper.
Inventory data showed copper inventories in warehouses monitored by the Shanghai Futures Exchange rose 1.8 percent from last Friday.
Although the manufacturing sector in the world's second-largest economy contracted at its sharpest pace in nine months in August, market watchers are ruling out a previously expected cut in banks' required reserve ratio after the Chinese central bank injected a seven-month high amount of funds into the financial system.
(Additional reporting by Carrie Ho in Shanghai; editing by Alison Birrane, Jane Baird and Jim Marshall)