Copper gains on weak dollar, Europe crisis eyed

LONDON:Copper prices rose on Wednesday, helped by a drop in the dollar and signs ofrestocking in China, but growing concerns about the debt crisis in Europe andits implications on economic growth kept caution alive.

Benchmarkcopper on the London Metal Exchange (LME) rose to $7,446 at 0923 GMT, up fromTuesday's close of $7,290 a tonne.

Helping lift prices was a weakdollar, which fell against the euro and a basket of currencies. A weak dollarmakes commodities priced in the U.S. unit cheaper for holders of othercurrencies.

"It looks to be more of a currency initiated move todaythat is prompting a risk-on tone in the market," said Robin Bhar, analyst atCredit Agricole.

"We also know the market is heavily short so if wemove through higher levels on copper then we'll get some of the larger shorts tocover."

Also helping to boost sentiment was expectations ofrestocking by Chinese consumers. LME copper stocks in Korea and Singapore,locations nearest to China, have been declining sharply since end of September.<0#MCUSTX-LOC>

Latest data showed copper stocks inLME-registered warehouses fell by 1,525 tonnes, with cancelled warrants -- metalearmarked for delivery-- at 10 percent of total stocks.

"We're seeingbonded warehouse stocks for copper at low levels now, and with the arb openingand China's economy still growing, you have to expect some hand-to-mouthrestocking," Bhar said.

"There may be a realisation that they(Chinese buyers) have missed the absolute low and will just have to come in andbuy whenever the price dips so that might create a higher floor in the coppermarket."

In industry news, Freeport Indonesia has ramped up copperconcentrate production at its strike-hit giant Grasberg mine, to more than 4,000tonnes per day in October, while almost 79,000 tonnes would be shipped thisweek.

CRISIS CAUTION Underlying caution about the euro zone debtcrisis prevented further gains for the metal ahead of the European Union's bankrecapitalisation plan due later on Wednesday, designed to cushion the impact ofa possible Greek default on the region's banks.

Meanwhile, theparliament of Slovakia rejected a plan to bolster the European FinancialStability Facility (EFSF) but a second vote with opposition support is likely toapprove the pact within days. Slovakia is the only euro zone member yet toratify the plan.

Fears about a debt default for Greece and possiblecontagion to other highly indebted euro zone countries have put pressure onmarkets in recent months, with copper off more than 25 percent in the thirdquarter.

"The price pullback here saw a late September spike in totalLME copper open interest as new shorts were added, contrasting to pure longsclosures in early August. Naturally, fresh shorts are concerning while thefundamental picture remains very mixed indeed," said Andrey Kryuchenkov, analystat VTB Capital said in a note.

Aluminium rose to $2,236.50 fromTuesday's close of $2,230 a tonne. Alcoa Inc , the largest U.S. aluminumproducer, said an economic slowdown hurt demand and knocked prices for the metallower, denting its third-quarter profit.

Lead climbed to 2,022.25from Tuesday's close of $1,985. Data showed lead stocks in LME-registeredwarehouses rose by 1,175 tonnes to a fresh record high of 386,850tonnes.

Zinc was at $1,959 from $1,912 a tonne, while nickel rose to$19,199 from $18,875 a tonne. Tin climbed to $22,800 from a close of $22,425 onTuesday.

A group of five smelters in the main Indonesiantin-producing region of Bangka island, are ready to export 500 tonnes of tiningots next week if benchmark prices hit $25,000 a tonne.