(Reuters) - London copper came off the session's highs on Thursday after the dollar rose, although hopes for more economic stimulus in China and the United States, which would boost demand for industrial metals, kept a floor under prices.
The dollar rose to a two-week high versus a basket of currencies .DXY, paring the appeal of dollar-denominated commodities, including copper.
Three-month copper on the London Metal Exchange was little changed at $7,392 a tonne by 0743 GMT, after having risen as high as $7,443.75 earlier.
Copper's gains were spurred by expectations for stimulus in China, after Premier Wen Jiabao said the world's top copper consumer faced headwinds despite cooling inflation, with traders saying another cut may be imminent in the reserves banks are required to hold.
Hopes for more pro-growth policies by Beijing were also bolstered by comments from China's Commerce Ministry on Thursday that the economy was having its longest run of falling inward investment growth since the 2008-09 global crisis and the trade outlook for 2012 was worsening.
"New stimulus policies can give metal prices a short-term boost and some people are betting on that," said a Shanghai-based trader. "But most investors prefer to stay on the sidelines, which accounts for few fresh positions opened so far and small price movements."
Although a string of recent data in the United States had appeared to reduce the likelihood of stimulus there, tame inflation figures on Wednesday indicated the Federal Reserve has room to stimulate the economy.
The most active December copper contract on the Shanghai Futures Exchange closed half a percent lower at 54,210 yuan ($8,500) per tonne.
LME copper, which has dropped more than 27 percent from a record of $10,190 in February 2011, has been stuck in a narrow trading range between $7,300 and $7,600 since July 20.
SHANGHAI ZINC FALLS
Zinc was the day's biggest loser, with Shanghai zinc falling 1.5 percent in its biggest daily loss since July 23. LME zinc was down 0.5 percent at $1,792.25.
"Shanghai zinc fell more than other metals, pressured by overproduction and weak downstream orders in China," said a second Shanghai-based trader.
Outside China, LME data showed 22,700 tonnes of zinc being delivered into Johor in Malaysia, but traders said this was common near the LME's prompt date on the third Wednesday of the month.
"In fact, zinc supply (outside of China) feels tight due to more and more stocks being tied up in financing deals. Physical premiums have shot up to $90 a tonne from $40 two weeks ago," a Singapore-based trader said.
Another Singapore-based trader put the premium at $100.
"It's hard to gauge the real premium level now. I heard someone asking for $100 last week, but no one has anything to sell this week. But if you shout $150 to a producer, I'm sure you'd get it," she said.
In aluminum, technical charts point to downward pressure for London prices despite talk of production closures and steady physical premiums, particularly in China, investment bank RBC Capital Markets said in a note on Wednesday.
Physical premiums for aluminum imports into China are now around $230 to $250 per tonne, having risen from around $140 at the start of the year due to long queues at metal warehouses, Shanghai Metals Market analyst Zhang Chenguang said.
($1 = 6.3625 Chinese yuan)
(Editing by Manolo Serapio Jr.)