Feb 16, 2012 NEW YORK (Dow Jones)--Copper futures fell on Thursday, but ended well above the day's lows as reports of progress toward a second bailout for Greece and a better-than-expected batch of U.S. economic data drew buyers back to the industrial metal.

The most actively traded contract, for March delivery, fell 1.05 cents, or 0.3%, to settle at $3.791 a pound on the Comex division of the New York Mercantile Exchange.

Futures slumped early on Thursday, touching the lowest intraday price since Jan. 23 after a set of developments overnight renewed concerns about the financial position of Europe. Moody's Investors Service placed 114 European financial institutions on review for a possible downgrade, and euro-zone ministers continued to indicate reluctance to give debt-laden Greece a blanket show of support.

Copper traders have closely followed the European developments as the region is a key consumer of the metal, often second behind top customer China. Many fear that an economic slump in Europe will crimp the region's demand for copper and pressure prices lower.

The euro early Thursday slumped below the psychologically important $1.30 mark as investors shed the single European currency in favor of the dollar. As the greenback rallies it damps demand for copper, since dollar-priced copper appears more expensive to market participants using other currencies.

But the euro erased its losses against the dollar, dragging copper and other growth-sensitive assets off their lows on hopes that Europe's central banks would lighten Greece's debt load.

A German newspaper reported that euro-area banks will exchange their existing Greek bonds for new ones, helping to pave the way for a swap deal between the country and its private creditors. Meanwhile, Germany's deputy finance minister on Thursday ditched a plan to withhold part of Greece's bailout.

The euro's gains helped copper and other commodities "claw back some of (their) losses," traders with RBC Capital Markets said in a note.

Continued signs of improvement in the U.S. labor market after a weekly reading on unemployment claims also supported market sentiment, analysts said.

Copper had rallied 16% to a peak settlement of $3.9785 a pound over the first six weeks of the year, but has been on a steady path lower as concerns about Europe erode investor confidence.

"Unfinished business with respect to Greece continues to weigh over the markets, chipping away at the strong gains we saw set in over the course of January," said Edward Meir, senior commodity analyst with INTL FCStone, in a note.

Production at the world's largest copper mine, Chile's Escondida, fell 25% in 2011 from the prior year due to a strike and falling ore grades. Escondida produced 819,261 metric tons of copper last year, versus 1.086 million tons in 2010.

Copper settlements (ranges include electronic and pit trading):
Mar $3.7910; down 1.05 cents; Range $3.7275-$3.8125
May $3.7985; down 1.15 cents; Range $3.7355-$3.8175