Reuters - Copper prices slid on Thursday, giving up the previous day's gains, as investors worried about the prospect of U.S. interest rates increasing earlier than expected and about a credit squeeze in top consumer China.

A stronger U.S. currency also pressured base metals, making the dollar-priced commodities more expensive to buyers outside the United States.

Three-month copper on the London Metal Exchange ended 1.9 percent lower at $6,430 a tonne, reversing a 1.1 percent gain on Wednesday.

In the previous session, copper dropped as low as $6,321, the weakest since July 2010, before surging to the highest in more than a week at $6,584.50 on what traders said was large-scale short-covering, especially by computer-driven funds.

"The base metals prices are on a rollercoaster ride, especially copper," said analyst Daniel Briesemann at Commerzbank in Frankfurt.

"The current prices in copper do not reflect the fundamental situation, but from a chart-technical perspective, it is still possible for copper to fall to the key support level of $6,037. So we are not out of the woods, especially if we get weaker economic data out of China."

Metals fell along with stocks and bonds after Fed Chair Janet Yellen said on Wednesday the Fed would probably end its massive bond-buying programme this autumn, and could start raising interest rates around six months later.

"Copper is under pressure because of the strength in the dollar," said Naeem Aslam, market analyst at Ava Trade.

"Janet Yellen's hawkish comment yesterday about the interest rate has spooked traders and risk off is the name of the game today."

The dollar rose higher against its major currency peers, while global equities pulled back as investors positioned for a speedier rise in U.S. interest rates than previously thought.

NICKEL, ALUMINIUM ALSO DROP

Simmering concerns about credit conditions and growth in China continue to curb consumer purchases of metals.

Cash-strapped Chinese are scrambling to sell their luxury homes in Hong Kong, and some are knocking up to a fifth off the price for a quick sale, as a liquidity crunch looms on the mainland.

China's yuan plunged to a one-year low against the dollar on Thursday and was on track for a record weekly loss. A falling yuan deters copper import demand because it makes importers' credit terms more expensive.

Reflecting lower demand for global stocks, premiums for copper held in China's bonded stockpiles fell by another $5 overnight to $110-130 a tonne, according to China-based information provider Shmet.

In other metals, nickel was the biggest loser, ending almost 3 percent lower at $15,840 a tonne. Nickel has been the strongest performer on the LME so far this year, surging 14 percent on concern about supply from Indonesia and Russia.

"Nickel price rises are clearly exaggerated and not justified from a fundamental point of view, but here again, we have to differentiate between the fundamental and the chart- technical picture," Briesemann said.

"The first one clearly points to prices below $15,000, while the latter one tells me the price rise could continue, maybe towards the $17,000 range."

LME aluminium closed 1.6 percent lower at $1,712 a tonne, following a delivery of over 200,000 tonnes into LME warehouses on Wednesday.

Shanghai aluminium on Thursday hit a second successive contract low since its 2005 inception, weighed down by endemic oversupply, and as tighter credit in China takes a toll on demand.

Lead fell 0.4 percent to $2,069, tin dropped 1 percent to $23,000 and zinc ended at $1,951, down 0.6 percent from Wednesday's last bid price.