LONDON: Copper edged higher on Wednesday as the euro steadied against the dollar, but concern about contagion from the euro zone debt crisis and upcoming elections in highly indebted Greece kept investors cautious and prevented further gains for metals.
Three-month copper on the London Metal Exchange rose to $7,443.75 a tonne at 0855 GMT, up 0.7 percent from Tuesday's close of $7,395 a tonne.
Base metals were supported by a slightly firmer euro against the US dollar. A weak dollar makes commodities priced in the US unit cheaper for holders of other currencies.
A 100 billion euro bank rescue plan for Spain earlier this week failed to calm nerves about debt contagion, and uncertainty remained about whether Greece will remain in the euro zone after its June 17 elections.
Spanish 10-year yields, which hit euro-era highs of 6.86 percent on Tuesday, were seen rising further and testing the 7 percent level which is viewed by many as the point at which borrowing from capital markets becomes unaffordable in the long term.
"The positive sentiment surrounding Spain's rescue seems to have faded. There is just too much uncertainty ahead of the Greek elections and the euro summit and investors are cautious," said Robin Bhar, analyst at Societe Generale.
"Until we get some of these uncertainties resolved it is difficult to see why anybody would want to put risk on. Copper prices are likely to be volatile."
The metal used in power and construction is trading more than 11 percent lower so far this quarter as worries about the euro zone debt crisis and uncertainty about demand from top consumer China weigh. It is down 1.8 percent in the year to date.
"Once again, market participants chose to remain on the sidelines, occupied by the macro newsflow in Europe in addition to concerns over lost growth momentum in China and the release of numerous macro statistics earlier this week," Andrey Kryuchenkov, analyst at VTB said in a note.
"The fundamental picture was also little changed from May, with copper still trading mostly off macro events."
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