SHANGHAI (Reuters) - Copper edged lower on Thursday, but held near a four-month high hit in the previous session, as traders awaited a key U.S. Federal Reserve policy decision that is expected to include further stimulus action to boost the world's largest economy.
Prices were also supported by a German court ruling that gave a green light for the country to ratify the euro zone's new bailout fund and budget pact, boosting hopes that the region is finally putting in place the tools to resolve its crippling debt crisis.
"Some longs prefer to take profit ahead of the (Fed) meeting since they've already made money on their positions and because there is always a chance that the Fed won't start another round of quantitative easing - even if many people expect it," said a Shanghai-based trader with an international firm.
RBC Base Metals said in a research note on Thursday that it expected mostly sideways movements in base metals, with small rises and falls in prices until the United States or China clarified whether they were putting out more monetary easing policies.
Three-month copper on the London Metal Exchange had ticked down 0.4 percent to $8,068 per ton by 0720 GMT, after hitting a high of $8,109 earlier in the session - not far from Wednesday's four-month peak of $8,170.
The most active January copper contract on the Shanghai Futures Exchange closed the session 0.3 percent lower at 58,120 yuan ($9,200) per ton.
A Reuters poll showed economists raised their bets for a third round of Fed bond buying known as quantitative easing to 65 percent from 60 percent in August.
In China's physical copper market, spot cargoes were trading about 180-250 yuan lower than the ShFE prompt September month contract, reflecting sluggish demand from downstream industries.
The ShFE September contract, however, is trading at a premium to forward months. The backwardation, traders said, was not due to tighter spot demand but due to Jinchuan Group, China's third-largest smelter, buying up about 20,000-30,000 tons of copper over the past few weeks.
"Downstream customers don't want to restock too much before the 18th Party Congress, which is expected to offer more clarity on where the Chinese economy is headed," said a Shanghai-based physical trader.
The Communist Party Congress, China's most important political event, is held once every five years with its top leaders being replaced only every decade. It is expected to be held in October but the exact timing has not been announced.
For now, the world's second-largest economy has introduced some measures to prop up growth.
It announced on Wednesday that it would boost exports by issuing export tax rebates faster and granting more loans to exporters, as well as increasing export credit insurance to small companies.
It recently also approved $157 billion in infrastructure spending.
Expectations that the Fed will act are fuelling speculation that China may also ease policy soon to shore up its cooling economy.
Reporting by Carrie Ho; Editing by Himani Sarkar and Chris Lewis