MARKETS-METALS (UPDATE 3) * Eyes on traditionally strong second quarter * LME copper stocks down 26,750 tonnes since March 1 * Coming up: U.S. producer prices for Feb at 1230 GMT (Recasts, adds comment/details, pvs Singapore) By Pratima Desai LONDON, March 17 (Reuters) - Copper hit a one-week high on Wednesday as the dollar slipped, inventories fell and talk of a Chinese yuan revaluation helped boost sentiment. Benchmark copper on the London Metal Exchange saw a session high of $7,547.25 a tonne. The metal used in power and construction was trading at $7,539 a tonne at 1045 GMT from $7,400 at the close on Tuesday. The dollar came under pressure after the U.S. Federal Reserve pledged to keep interest rates near zero for an "extended period". A lower dollar makes metals cheaper for holders of other currencies. "The dollar is weakening and copper stocks keep declining, it's all positive," said David Thurtell, analyst at Citi. Stocks of copper in LME warehouses are down 26,750 tonnes since March 1 to a 2-month low of 525,575 tonnes. They are expected to fall further in the second quarter, traditionally the strongest for metals demand. "We maintain that copper fundamentals, which have ... begun to tighten, will likely continue to do so as (developed market) demand continues to improve against slowing but still robust (emerging market) demand," Goldman Sachs said in a note. The Fed's decision to keep benchmark interest rates in a zero to 0.25 percent range would also help consumer demand in the United States, the world's largest economy, which would feed through to global growth, traders said. RISING TEMPERATURE China repeated its commitment to a stable exchange rate after the U.S. Congress threatened to levy duties on some Chinese exports unless it revalues its currency. However, some analysts think there is a chance China will allow the yuan to rise against the dollar. "The underlying message is the yuan will be revalued in some form," said John Meyer, analyst at investment bank Fairfax. "That would be good for metals because China is such a major buyer ... a revaluation makes metals look cheaper in China." China is the world's largest consumer of copper. It is also the largest consumer and producer of aluminium. Aluminium, used in transport and packaging, hit a two-month high of $2,293 a tonne. It was last at $2,290 a tonne from $2,258 at the close on Tuesday. The metal has been supported by financing deals, said to have tied up about 70 percent of LME stocks, to release cash for producers and earn high returns for banks. Sentiment has also been reinforced by cancelled warrants -- material tagged for delivery -- on LME stocks. Aluminium cancelled warrants stand at 6.7 percent of total stocks at 4,546,025 -- nearly 95,000 tonnes below the record high above 4.64 million tonnes hit on January 21. Zinc, used to galvanise steel, was trading at $2,357 a tonne from $2,307 on Wednesday and battery material lead at $2,282 a tonne from $2,220. Tin was at $17,800 a tonne from Tuesday's last bid at $17,550 a tonne and stainless steel ingredient nickel at $22,240 from $21,875. For story on Kazakh copper output click on Metal Prices at 1036 GMT Metal Last Change Percent Move End 2009 Ytd Percent move COMEX Cu 340.30 4.60 +1.37 334.65 1.69 LME Alum 2285.00 27.00 +1.20 2230.00 2.47 LME Cu 7531.00 131.00 +1.77 7375.00 2.12 LME Lead 2280.00 60.00 +2.70 2432.00 -6.25 LME Nickel 22210.00 710.00 +3.30 18525.00 19.89 LME Tin 17675.00 125.00 +0.71 16950.00 4.28 LME Zinc 2353.00 46.00 +1.99 2560.00 -8.09 SHFE Alu 16820.00 125.00 +0.75 17160.00 -1.98 SHFE Cu* 60140.00 1340.00 +2.28 59900.00 0.40 SHFE Zin 18995.00 340.00 +1.82 21195.00 -10.38 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

Source