SHANGHAI - London copper extended losses, pressured by a bounce in the dollar against the euro as disappointing US data and the unfolding Greek debt crisis weighed on prices.
The US dollar held at three-week highs against a basket of major currencies, having staged its biggest rally in 10 months on a wave of short covering as worries about the impact of the Greek debt crisis hammered the euro.
Three-month copper on the London Metal Exchange fell 0.8 per cent to $US9,084.25 at a tonne by 1750 AEST, after losing 0.2 per cent in the previous session.
The most-active August copper contract on the Shanghai Futures Exchange closed down 0.7 per cent at 68,150 yuan per tonne.
Copper will continue to be directed by macroeconomic factors in the absence of changes to its fundamentals, Jinrui Futures analyst Guo Yong said.
"As a widely used industrial metal, it is the most representative among the base metals in reflecting developments in the global economic outlook. And being in an overall supply deficit situation, it has also been attractive to speculators," he said.
"We can expect more rangebound volatility to follow key economic data events around the globe. But I think daily price fluctuations will stay moderate – within $US300 on the LME and 2,000 yuan on the Shanghai exchange."
Data showed the US economy is facing a troubling mix of higher prices and weak growth. Underlying US inflation rose to its highest level in nearly three years in May while a regional factory gauge posted a surprise contraction this month.
The world's economic prospects have darkened slightly, a Reuters poll of economists showed, with new signs of a slowdown in the United States compounding fears about the poor fiscal health of Western economies.
"The Chinese copper market is also under pressure from the specter of more tightening after the rise in the yield on bills," a Shanghai-based trader said.
The yield on the Chinese central bank's three-month bills unexpectedly rose by around eight basis points at auction, suggesting to many market participants that another benchmark interest rate rise may be on the way.
Euro zone officials said a new three-year financing programme for Greece may be delayed until next month due to differences over how to involve private investors, even as the country teetered on the brink of default and protests against austerity turned violent in Athens.
China is likely to increase bank deposit rates twice more this year while raising lending rates just once before pausing in its present policy tightening cycle aimed at taming inflation, a Reuters poll showed.
The tightening measures will further squeeze credit available to base metal consumers.
Base metals fell across the board on the LME and ShFE, with the exception of LME aluminium , which edged up just 0.08 per cent.
