(Adds analyst comment and dateline, updates prices)

By Eric Onstad

LONDON, June 18 (Reuters) - Copper prices lost traction on

Thursday, as the dollar strengthened following a hawkish U.S.

central bank meeting and due to wariness about the U.S.-Iran

peace deal.

Benchmark three-month copper on the London Metal Exchange

was down 1% at $13,682 a metric ton at 0930 GMT, after

it ended with a 0.3% gain in the previous session.

The dollar index hovered close to two-month highs as

traders bet on possible rate hikes after new Federal Reserve

chair, Kevin Warsh, highlighted inflation concerns.

Markets are currently pricing in a 50% chance of a

25-basis-point rate hike in September, according to CME Group's

FedWatch tool, higher than 27% priced in on Wednesday.

A stronger dollar makes greenback-priced commodities more

expensive for buyers using other currencies.

"His (Warsh) emphasis on vigilance against price pressures

seems to have unwound the optimism that had briefly lifted the

complex following progress on the U.S.-Iran peace agreement,"

said Neil Welsh, head of metals at Britannia Global Markets.

The yield on the 2-year bond, which is most sensitive to the

market's expectations for rate action, rose to its highest since

February 2025.

"Should U.S. bond markets remain unsettled, we could see further

downside pressure on metals by virtue of a stronger dollar and

rising rates," said analyst Ed Meir at broker Marex.

LME copper touched a one-week high on Monday after U.S. and

Iranian officials agreed a framework to end the war.

The two nations released the text of the agreement on Wednesday,

but U.S. President Donald Trump threatened to resume attacks if

Iran failed to honour its commitments.

The most-traded copper contract on the Shanghai Futures

Exchange dropped 0.5% to 104,780 yuan ($15,497) a ton,

ending a week shortened by China's Dragon Boat Festival holiday

from June 19 to 21.

Among other metals, LME aluminium slipped 0.2% to

$3,404 a ton, zinc was little changed at $3,587, lead

fell 0.4% to $1,971.50, nickel shed 0.8% to

$17,920 and tin dropped 2.1% to $54,180.

($1 = 6.7615 Chinese yuan renminbi)