Copper and other base metals slipped on Wednesday as the dollar strengthened on expectations that US authorities were close to hiking interest rates. Losses were modest, however, after data showed activity in the services sector of China, the world's top metals consumer, expanded in July at its fastest pace in 11 months.
Markets were pressured by the dollar hitting a 3-1/2 month peak against a basket of currencies on Wednesday after a voting member of the US Federal Reserve's policy-setting committee expressed support for an interest rate hike in September.
A stronger dollar makes commodities priced in the US currency more expensive to buyers using other currencies.
Three-month copper on the London Metal Exchange was down 0.7 percent at $5,201 a tonne by 1003 GMT, after closing little changed in the previous session but within reach of Monday's six-year lows at $5,142 a tonne.
Copper, which has shed about a fifth of its value over the past three months, is trading lower than supply/demand fundamentals would warrant, said analyst Vivienne Lloyd at Macquarie in London.
"With the willingness that people have to throw money at the market to see if they can push it lower, you can imagine it would go lower. But I don't think it deserves to on the basis of fundamentals," she said.
"If you look at the supply side, the market looks a bit tighter, but prices don't reflect that."
One of several recent supply issues is a strike at a Codelco mine in Chile, which has prompted the world's top copper producer to stop offering spot refined copper to China for two weeks, sources said.
Some traders said supply remained adequate despite the strike, highlighted by a rise in LME copper stocks by 14 percent since June 26.
Despite Wednesday's stronger data on Chinese services, slowing factory growth is still weighing on metals markets.
"Sentiment here among Chinese investors is quite bearish at the moment, it's hard to see any sustainable rebound from here," said analyst Judy Zhu of Standard Chartered in Shanghai.
In other metals, resilience in LME nickel prices may not prove sustained as consumers stay away, said broker Triland in a report.
"There is nothing to suggest any greater upward correction is around the corner just yet ... Physical trade and the scrap sector are noticeable for their absence from the market at present."
Nickel bucked the weaker trend, rising 0.7 percent on bargain hunting to $10,900 a tonne.
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