Updates prices, rewrites first paragraph

By Mai Nguyen

July 4 (Reuters) -Copper prices rose onThursday on a weaker dollar, but poor economic data and softer physical demand at higher prices capped gains.

Three-month copper on the London Metal Exchange (LME) CMCU3 rose 0.1% to $9,877.50 per metric ton by 0820 GMT, after rising 2% in the previous session, the biggest daily gain since June 6.

Meanwhile, the most-traded August copper contract on the Shanghai Futures Exchange (SHFE) SCFcv1 closed up 1% to 79,870 yuan ($10,984.58) a ton.

A softer dollar, weighed down by weak U.S. economic data and expectations of rate cuts, made greenback-priced metals cheaper to holders of other currencies.

However, prices gain were limited.

"Copper has limited upside as exchange inventories pile up and demand remains price-sensitive," said Sandeep Daga, a director at Metal Intelligence Centre.

The downtrend in manufacturing and service sector PMI hints at a slowdown in the world's top two economies, Daga added.

LME copper inventory rose to 186,450 tons, the highest since October 2023. Stockpiles in SHFE warehouses have eased slightly in recent weeks, but are still relatively high. MCUSTX-TOTAL, CU-STX-SGH

The U.S. labour market was gradually slowing and the manufacturing sector was contracting, while Chinese manufacturing activity expansion was broadly declining in June.

However, Citi analysts said LME copper could test $10,00 a ton in the weeks ahead, citing hopes of Chinese policy easing in July and a Fed rate cut in September.

"The grid (in China) is an obvious focus for further investment to avoid bottlenecks for renewables additions. More property measures and monetary easing would also be copper-supportive," they said in a note.

LME aluminium CMAL3 dipped 0.1% to $2,544.50 a ton, nickel CMNI3 eased 0.5% to $17,240, zinc CMZN3 rose 0.5% to $3,007, lead CMPB3 was nearly flat at $2,221.50, and tin SSNcv1 shed 0.5% to $33,195.

SHFE aluminium SAFcv1 eased 0.1% to 20,420 yuan a ton, nickel SNIcv1 increased 0.2% to 137,590 yuan, zinc SZNcv1 climbed 0.7% to 24,670 yuan, lead SPBcv1 edged up 0.1% at 19,570 yuan and tin SSNcv1 was up 0.3% at 274,260 yuan.

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($1 = 7.2711 yuan)

Reporting by Mai Nguyen in Hanoi; Editing by Varun H K and David Holmes

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