A three-day rally in the dollar sent copper futures reeling to a new nine-month low on Friday after a surprisingly strong report on U.S. jobs growth in December eased some concerns of an economic slowdown, analysts said.
"The dollar is rallying and it is sending the copper pretty much into a free-fall, with no specific bottom in sight right now," said Scott Meyers, senior trading analyst with Pioneer Futures.
Copper for March delivery settled down 6.70 cents at $2.5350 a pound on the New York Mercantile Exchange's COMEX division, its weakest settlement since early April last year.
Trading ranged from $2.52 to $2.61.
Spot January copper slipped 6.60 cents to close at $2.5225.
Final estimated futures volume was estimated at 9,000 lots, compared with Thursday's official count at 13,867 lots.
The U.S. economy added a surprisingly strong 167,000 jobs in December, well above market expectations for a rise of 100,000.
Robust job growth, coupled with upward pressure on hourly wages, was seen keeping the Federal Reserve concerned enough about inflation to leave its key interest rate on hold for at least several months to come.
Some copper analysts believed the market would need to take a "wait-and-see" approach to the surprisingly strong data.
"The jury is still out on it," said Edward Meir, metals analyst with Man Financial.
"With a stronger jobs number, you can make the argument that the economy is still growing and generally should be constructive for the metals. Having said that, it also means higher rates and a stronger dollar, so we will have to see how it plays out."
The euro dropped to its lowest since Nov. 24 against the dollar.
With Friday's decline, it was the worst three-day decline for the euro against the dollar since Nov. 2005 at current prices.
Since charging to all-time highs above $4.00 a pound in early May of last year, copper prices have erased over 39% of their value.
"It really didn't take that much to send the market higher. All we needed was demand to outstrip supply by a fairly modest margin and now we're seeing the reverse," James Steel, metals analyst with HSBC, said on CNBC .
"Now we are seeing supply catch up with demand and I think as that is being recognized in general, the market is coming back down, but it doesn't necessarily mean the economy is slowing dramatically although it is certainly moderating," he added.
Overnight inventory data showed London Metal Exchange-registered copper stock levels continued to build steadily, reflecting the slowdown in demand.
LME stocks rose 1,700 tons to 194,875 tons on Friday, while COMEX stocks were unchanged at 33,995 short tons on Thursday. Copper inventories monitored by the Shanghai Futures Exchange fell by 0.8% to 31,043 tons in the week ended Thursday.
On the LME, three-months copper settled at $5,611 a ton, down 2.1% or $119 from Thursday's kerb close.