SHANGHAI (Dow Jones)--Base metals on the Shanghai Futures Exchange fell Tuesday as investors cashed in due to ongoing caution over the agreement to raise the U.S. borrowing limit. Benchmark SHFE October copper settled 1.6% lower at CNY72,230 a metric ton. After Monday's relief gains, metal investors shifted focus to the possibility of a credit downgrade, which could have a significant impact on global markets and demand for hard assets like commodities. "The main concerns are still with the U.S., whether it will be downgraded and what will actually happen after the debt deal is reached," said Everbright Securities Futures Xu Yongqi. Poor manufacturing indicators out of the U.S. overnight also weighed on investor sentiment, sweeping away the relief brought by the debt agreement reached late Sunday. Weakness in metals was also due to a rebounding dollar against the euro after the American agreement, which makes the dollar-denominated metals appear more expensive to other currency holders, analysts said. Around 0700GMT, the euro was at $1.4186, compared with $1.4250 in New York late Monday. Chinese investors were further plagued by concerns over the domestic economy given July's weak manufacturing data and speculation over a possible rate hike as early as August 10. A key window for a possible rate increase in China is around Aug. 10 and the country's current rate hike cycle will likely be over if the central bank doesn't move at that time, Xinhua news agency said Tuesday. SHFE copper wasn't getting any help from ongoing strikes at BHP Billiton's Escondida mine in Chile, the world's largest copper mine, as investors shied away from higher prices, a physical trader in Shanghai said. Copper traded at the Changjiang Nonferrous Metals Trading Market, a major spot metals market in Shanghai, was quoted at CNY71,600-CNY71,700/ton, down from CNY72,300-CNY72,400/ton Monday. Three-month London Metal Exchange copper ended Monday's afternoon kerb $179.5 lower at $9,649.5/ton. It was quoted 0.2% higher at $9,670/ton around 0700 GMT, when the SHFE closed. SHFE aluminum settled 1.1% lower, lead settled 1.9% lower and zinc lost 1.8%. Tuesday's settlement prices in yuan a ton and LME late kerb prices from Monday in dollars a ton: SHFE LME Copper Oct 72,230 Dn 1,160 3Mo 9,649.5 Dn 179.5 Aluminum Oct 18,335 Dn 210 3Mo 2,585 Dn 39 Zinc Oct 18,520 Dn 340 3Mo 2,461 Dn 29 Lead Sep 17,265 Dn 340 3Mo 2,564 Dn 47.5 -Yue Li contributed to this article; Dow Jones Newswires; (8621) 6120 1200; yue.li@dowjones.com

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