Copper slipped on Thursday as investors cut bets on higher prices, although expectations of robust growth in China and a surge in the yuan supported optimism about demand in the world's largest consumer of industrial metals. Benchmark copper on the London Metal Exchange closed down 1.2 percent at $5,580 a tonne. Investors turned cautious after prices of the metal used in power and construction stalled having gained 2.6 percent in the previous session, reaching their highest since December 16.
"It's just pure profit taking on the back of the fact that we got back above $5,600 and there was probably a lack of follow-through," Societe Generale analyst Robin Bhar said. Investors were also hedging their bets ahead of US non-farm payroll data due to be released on Friday, he said.
Copper had stabilised earlier after China's yuan recorded some of the biggest gains on record and the dollar fell against a basket of currencies, making dollar-denominated assets such as copper cheaper for holders of other currencies. The stronger yuan relieves pressure on China to raise money market interest rates, which would reduce liquidity and raise the cost of borrowing, hampering economic growth.
"We have seen the stress in the Chinese money market beginning to ease," said Danske Bank analyst Jens Pedersen. "That is helping base metals also because when there's stress in the financial market in China it also hurts the economy." Possible strike action in February at BHP Billiton's Escondida copper mine in Chile was also on the radar for traders. "Any disruptions at the world's largest copper mine could impact the copper price," analysts at Investec said in a note.
In other metals, lead closed 1.2 percent lower at $2,053.5 a tonne, while nickel gained 0.7 percent to $10,290. Both had gained between 3 and 4 percent in the previous session. Aluminium closed 1 percent higher at $1,702 a tonne, and tin slipped 0.3 percent at $21,075 a tonne. Zinc closed 0.1 percent lower at $2,618.5 a tonne, after rising 3.9 percent on Wednesday. Prices of the metal used to galvanise steel climbed 60 percent last year, meaning the annual commodity index rebalancing next week could pressure LME zinc.
"The selling of 10.9 percent of the daily volume over each of the five days represents a decline of 8.9 percent in total open interest. In total 7,093 lots of zinc will need to be sold on the close," Societe Generale said in a note.