June 18 (Reuters) - Copper declined on Thursday as hawkish Federal Reserve projections outweighed improvement in risk appetite following the U.S.-Iran peace deal.

Benchmark three-month copper on the London Metal Exchange CMCU3 fell 1.03% to $13,672.50 a ton as of 0326 GMT.

The most-traded copper contract on the Shanghai Futures Exchange SCFcv1 dropped 0.72% to 104,530 yuan ($15,458.44) a ton.

The dollar =USD held near a two-month high after the Fed left interest rates unchanged, as new projections showed nine of 19 policymakers now expect a rate hike by the end of 2026. None had projected an increase three months ago.

A stronger dollar makes greenback-priced metals more expensive for holders of other currencies, while higher interest rates typically weigh on growth-sensitive commodities such as copper.

The move came at Kevin Warsh’s first meeting as Fed chair, where the central bank stripped back its policy statement and removed guidance on near-term action, leaving markets with less clarity on the future path of rates.

The hawkish turn in U.S. monetary policy outlook is undoing some of the relief the copper market saw from the agreement of a peace deal between the U.S. and Iran.

The U.S. and Iran released the text of a 14-point interim agreement on Wednesday to extend their ceasefire by another 60 days while the two sides negotiate a final truce.

The higher oil prices spurred by the Iran war had been weighing on copper, feeding inflation concerns and weakening risk appetite. The agreement helped to erase much of oil's gain since the war, easing inflation fears.

In top consumer country China, major copper producers are seeking to expand membership of the China Smelters Purchase Team, or CSPT, as they look to strengthen their position in concentrate procurement talks with miners as supply of the raw material remained tight.

The potential expansion comes as Chinese smelters negotiate concentrate supply deals with Chilean miner Antofagasta ANTO.L, with spot treatment and refining charges stuck deep in negative territory, meaning smelters have to effectively pay miners. The CSPT also declined for a sixth straight quarter to issue quarterly TC/RC guidance as it avoids setting a negative benchmark.

Among other metals on the LME, aluminium CMAL3 dropped 0.53%, zinc CMZN3 pulled back 0.50%, lead CMPB3 declined 0.61%, nickel CMNI3 lost 0.94% and tin CMSN3 tumbled 2.61%.

Elsewhere on SHFE, aluminium SAFcv1 ticked 0.17% lower, zinc SZNcv1 gained 0.16%, lead SPBcv1 dropped 0.30%, nickel SNIcv1 shed 0.35% and tin SSNcv1 slid 2.41%.

($1 = 6.7620 Chinese yuan renminbi)