NEW YORK, Aug 26, 2010 (Dow Jones Commodities News via Comtex) --

A larger-than-expected fall in U.S. jobless claims and declines in physical inventories boosted copper futures Thursday as participants bought back previously sold positions.

The most actively traded copper contract, for December delivery, rose 9.4 cents, or 2.9%, to settle at $3.3255 a pound on the Comex division of the New York Mercantile Exchange.

"We've had a pretty big selloff in copper recently," said Dan Cook, Chicago-based senior market analyst with brokerage firm IG Markets. "They might have overreacted a little earlier in the week."

Prices have been on the retreat after data earlier this week showed U.S. new-home buying dropped to a record low, durable goods orders increased far less than expected, and existing home sales plunged to their lowest level in 15 years.

Concern about the economic recovery, and thus demand for the industrial metal, eased a bit Thursday.

Copper--widely used in manufacturing and construction and closely linked to the health of the economy--ticked higher after a government report showed that initial unemployment claims declined by 31,000 to 473,000 in the week ended Aug. 21. Economists had predicted filings would decline by 10,000.

The metal had already been rising on inventory data, which can be an indicator of demand.

Inventories of copper stored in London Metal Exchange-monitored warehouses fell 1,175 metric tons Thursday, leaving them at 401,250 metric tons. The most recent Comex inventory data, released late Wednesday, were down 218 short tons at 99,687 short tons.

"That continues to provide some underlying support," said Stephen Platt, analyst with Chicago-based Archer Financial Services.

New York trading also took upward direction from copper on the London Metal Exchange, which jumped overnight on Chinese buying based on cheaper LME prices versus domestic copper.

The metal got an additional boost from a Spanish newspaper report saying 18 mines in Chile closed following an accident that trapped 33 miners in Copiapo. However, the closures in Taltal, Tocopilla, Antofagasta and Calama aren't expected to have an impact on copper production as they are small mines.

Copper settlements (ranges include electronic and pit trading):
Sep $3.3045; up 9.35 cents; Range $3.2210-$3.3150
Dec $3.3255; up 9.40 cents; Range $3.2425-$3.3350