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CNBC: Copper falls on dollar, ECB comments limit losses
 
LONDON (Reuters) - Copper fell on Thursday as the dollar rose, but the metal remained supported near six-week highs after the European Central Bank (ECB) gave its backing to a concrete plan to help lower the borrowing costs of struggling euro zone countries.

ECB President Mario Draghi said the institution agreed to launch a new and potentially unlimited bond-buying program that would draw a line under the debt crisis that has shaken most economies.

Convincing measures to help solve the critical debt situation in the euro zone should spur the region's economic growth and boost demand for industrial metals.

But the lack of detail in the plan pushed the euro to a session low against the dollar, which also rose against a basket of currencies. That made commodities like metals priced in the dollar more expensive for investors holding other currencies. <.DXY>

Three-month copper on the London Metal Exchange was $7,712 per metric ton (1.1023 tons) at 1413 GMT, off a six-week high of $7,749, from a close of $7,740 on Wednesday.

"The fact that he omitted clear details spurred some liquidation (in copper) after the buying of the last few days," T-commodity consultant Gianclaudio Torlizzi said.

"Although copper was unable to break through the next resistance levels of $7,750 and $7,820, it appears well supported and will likely move up in the next few days given the ECB's propensity towards a more aggressive monetary policy."

The ECB held its main interest rate at a record low of 0.75 percent, holding fire after a pick-up in inflation last month offset pressure to breathe life into the flagging euro zone economy by easing borrowing costs.

Copper also found support from report that showed the number of Americans filing new claims for jobless benefits fell last week to its lowest level in a month, an upbeat signal for a labor market that has struggled to create enough jobs.

U.S. private employers also added 201,000 jobs in August, easily beating economists' expectations.

Still, the Organization for Economic Cooperation and Development said the outlook for the Group of Seven major developed economies had darkened in recent months as the turmoil in the euro zone spread. It forecast economic growth of just 1.4 percent this year for the G7 as a whole.

POOR DEMAND, POOR SUPPLY

China's economic growth has slowed too and copper demand has weakened in the last few months.

Although LME copper stocks fell for the seventh consecutive session to hit their lowest level since October 2008, traders said demand for the industrial metal on the physical market remained sluggish.

But weak production data could help mitigate the effects of dwindling demand.

The world's top copper producer, Chile's Codelco, for example, produced 767,000 metric tons of copper in the first half of the year, down 6.4 percent year-on-year.

"Mine supply is not growing as much as expected, and that's part of the explanation for why copper has outperformed the other metals in the last few months and this year as a whole," Credit Suisse analyst Ivan Szpakowski said.

"The question now is whether that continues in the last four months or whether you finally get some of these ramp-ups and expansion. If that does happen, you leave copper prices very vulnerable."

In other metals, aluminum was almost flat at $1,973 a metric ton from $1,972 at the close on Wednesday. The metal used in packaging and transport hit a session high of $1,987.50, its highest since early July.

"Aluminum had been oversold in the last quarter in comparison with other metals," said Kamil Wlazly, a senior metals analyst at Metal Bulletin Research. But he added that prices were now well below the costs of production.

"About 50-60 percent of global capacity is making losses, so there is more pressure on primary producers to cut output."

Zinc, used to galvanize steel, was $1,905 from $1,891, while battery material lead was $2,056 from a last bid of $2,028.

Tin was $19,600 from $19,700 and nickel was $16,165 from $16,100.
Source