Copper futures slide on fears over demand, US dollar gains

Copper futures in Shanghai fell on Friday as the US dollar strengthened following the announcement by the European Central Bank (ECB) of its massive government bond purchasing program.

The most-traded copper contract for March on the Shanghai Futures Exchange (SHFE) closed at 41,010 yuan ($6,561.60) per ton Friday, down 550 yuan or 1.32 percent from Thursday. The trading volume declined by 19,490 lots Friday from the previous trading session's 526,812 lots.

The price was down 30 yuan compared to the previous Friday, January 16.

Negative sentiment in the market continued amid concerns over demand in China, with data indicating that Chinese factory activity is still contracting, according to a research note by the Australia and New Zealand Banking Group.

HSBC's preliminary manufacturing Purchasing Managers' Index (PMI) came to 49.8 for January, the bank said Friday, only slightly up from December's 49.6. A reading below 50 indicates contraction.

Some attributed the slide in copper prices to the upcoming Chinese Lunar New Year, which falls on February 19.

Meanwhile, the ECB said Thursday it would purchase sovereign debt from March until the end of September 2016. The euro weakened toward an 11-year low against the dollar after the ECB announced the program, according to a report from Bloomberg Thursday.

This weighed on copper prices, as the metal is priced in the dollar, making it more expensive for holders of other currencies.