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PrintLondon copper slipped on Thursday from a nine-day high hit in the previous session, as a short-covering rally triggered by surprisingly robust U.S. jobs data ran out of steam.
Copper prices are recovering from three-month lows touched in November, but rallies have typically fizzled due to worries that a rising tide of supply will dent prices next year.
"The major reason for copper's rebound is probably due to the dollar weakening last night and a technical rally," said Helen Lau, an analyst at UOB-Kay Hian Securities in Hong Kong.
Lau said economic events would remain the dominant driver of copper prices for now, with prospects for further weakness in the short term.
"The U.S. jobs data may continue to improve so that provides a strong case for the Fed to consider tapering. If that is the case, the dollar will strengthen and copper will come down
again," said Lau.
A strong jobs report could be a Catch-22 for copper. While economic recovery bodes well for industrial copper demand, it could bolster chances for the Federal Reserve to curb its stimulus measures soon, reducing support for liquidity- friendly commodities.
Three-month copper on the London Metal Exchange had slipped 0.21 percent to $7,080.25 a tonne by 0743 GMT, paring gains of nearly 2 percent from the previous session.
Copper prices rallied to $7,128 a tonne on Wednesday, their highest since Nov. 25, making a fitful recovery from three-month lows touched on Nov. 19 at $6,910 a tonne.
The most-traded February copper contract on the Shanghai Futures Exchange jumped 0.79 percent to close at 50,720 yuan ($8,300) a tonne.
U.S. private-sector hiring rose in November at the fastest clip in a year, opening the door wider for the Fed to start trimming its bond purchases within the next few months.
"Copper moved up initially after option expiry and then short-covering continued - the market was short and got spooked by the better ADP employment number," a Singapore based trader said.
Also strengthening the potential for headwinds from a stronger dollar, analysts said the euro could come under selling pressure, given that the European Central Bank is likely to stay very dovish in a meeting on Thursday.
Traders are reluctant to take positions ahead of a key U.S. labour report for November due on Friday.
"In a quiet market like this, it looks like it (copper) will drift lower again," broker Triland Metals said in a note.
Elsewhere, growing international acceptance of China's renminbi currency is set to draw in liquidity for new commodities contracts, the chief executive of the Hong Kong Exchanges and Clearing Ltd (HKEx) told Reuters.
The Shanghai Futures Exchange aims to launch nickel and tin futures contracts to broaden the range of non-ferrous metals covered, an exchange official said on Thursday.
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