METALS-Copper slips as strong dollar offsets demand optimism
* Euro drops to 1-1/2 month low vs dollar
* China services sector grows in August
* Coming up: U.S. ISM for August at 1400 GMT
LONDON, Sept 3 (Reuters) - Copper prices slipped on Tuesday as a strong dollar weighed on the base metals complex, but further falls were capped by growing optimism about the outlook for demand from top consumer China.
Three-month copper on the London Metal Exchange slipped to $7,203.25 a tonne at 1000 GMT, down from a close of $7,240 on Monday.
Putting pressure on metals was gains in dollar against the euro, with the single currency falling to a 1-1/2 month low against the greenback. A strong dollar makes commodities priced in the U.S. unit more expensive for holders of other currencies.
The dollar was supported by expectations that the U.S. Federal Reserve could begin to withdraw stimulus measures as early as this month due to signs of improvement in the economy.
"Any withdrawal of stimulus in the U.S. will support the dollar especially if data out of the U.S. continues to be as good as expected," said Robin Bhar, analyst at Societe Generale.
"This suggests that gains in base metals will be capped. There is scope to test some key downside support levels such as $7,000 for copper."
He said U.S. ISM data, due later in the session, as well as U.S. nonfarm payrolls numbers on Friday are likely to be closely watched by the market for further evidence of the pace of recovery in the world's largest economy.
Helping keep falls in check, official data showed China's services sector grew steadily in August as domestic demand picked up, adding to signs that government measures have started to steer the economy out of a long slowdown.
Optimism about the outlook for the global economy has been gathering pace in the wake of strong factory data in Europe and China this week.
Improving demand from the world's top copper consumer has been stronger than expected over the summer months, helping to shore up copper prices above the $7,000 a tonne level in August.
However supply is expected to swell into the second half as mines increase their output, which could limit prices.
"In China's case we definitely saw quite decent physical demand in August. We are also going into Q3 which is the peak season for production for export orders so that will put a floor under prices for now," said analyst Sijin Cheng of Barclays in Singapore.
"Still, on the macro side, there are a lot of uncertainties while production data has been outperforming month after month. There are not too many bright spots for copper right now," she added.