(Recasts, adds comment, updates prices) * Zinc hits highest since mid-April * Momentum-based fund buyers boost complex * Coming Up: U.S. consumer sentiment for July at 1400 GMT By Melanie Burton July 26 (Reuters) - Copper rallied to its highest in a week on Tuesday, lifted by a sagging dollar, fund buying and a strike at the world's biggest copper mine, which focused investors on supply. LME copper rose 1.4 percent to $9,789.25 at 0945 GMT, up from a close of $9,655 a tonne on Monday. The metal used in power and construction last week rallied to $9,873.50, its highest since mid-April. Base metals are being buffeted by the global economic outlook, and U.S. and euro zone sovereign debt in particular, during the seasonal summer slowdown, when buying from top consumer China is typically weak. Funds that buy on momentum signals, known as commodity trade advisers (CTAs), have played a part in the price run-up of the past few days, traders said. "With the weak dollar and Escondida and CTA buying coming into the market, copper is up $100 overnight," head of metals trading Steve Hardcastle at Sucden Financial said. "Looking forward, the key to the entire complex is the dollar. Technically the dollar is oversold and is due for a correction, and that is liable to coincide with a resolution to the U.S. debt negotiations taking place at the moment." The dollar fell across the board on Tuesday as a speech by U.S. President Barack Obama gave no sign of a swift breakthrough in deadlocked talks to raise the U.S. debt ceiling, while a run of strong earning reports supported world stocks. A softer dollar makes commodities cheaper for holders of other currencies. Rising prices may entice larger hedge funds to open fresh long positions, especially given supply side concerns that could crimp concentrate supply going forward, another LME category one trader said. "You've got the strike at Escondida and that's helping copper prices," he said. "Hedge funds are still largely on the sidelines, but as (the complex) makes fresh highs you're going to see more come in on the long side." Strikers at the world's top copper mine, Chile's Escondida, are set to hold government-mediated talks on Tuesday aimed at defusing a four-day stoppage that threatens to spread to other deposits, a union leader said. Escondida, which produces nearly 7 percent of the world's mined copper, stands to lose production of about 3,000 tonnes per day during the strike. "The daily loss of production is quite sizeable and may exacerbate the ongoing tightening process in the global refined market," Credit Suisse Private Banking said in a note. A poll of 24 commodities analysts expect copper to be on average in 330,000 tonne deficit this year ALUMINIUM DENTED Overall economic uncertainty may dent demand for aluminium, but producer Norsk Hydro still plans to further increase output, Chief Executive Svein Richard Brandtzaeg said. "We remain optimistic about the prospects for aluminium demand," he said. "However, recent increased uncertainty due to a more volatile macro environment and sovereign debt issues may result in increased demand fluctuations in the coming months." Aluminium edged up to $2,641 from $2,620, after having reached its highest in six weeks at $2,649. Zinc , used in galvanizing, hit its highest level in more than three months at $2,526, spurred on by momentum-based fund buys, before settling at $2,520.75 from a close of $2,470. Battery material lead traded at $2,724.25 from $2,675 and nickel was at $24,108 from $23,80 Tin was at $28,400 from $28,150. Metal Prices at 0946 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Pct Move End 2009 Ytd Pct move COMEX Cu 445.50 5.15 +1.17 334.65 33.12 LME Alum 2610.00 -10.00 -0.38 2230.00 17.04 LME Cu 9680.00 25.00 +0.26 7375.00 31.25 LME Lead 2678.00 3.00 +0.11 2432.00 10.12 LME Nickel 23800.00 0.00 +0.00 18525.00 28.48 LME Tin 28125.00 -25.00 -0.09 16950.00 65.93 LME Zinc 2468.00 -2.00 -0.08 2560.00 -3.59 SHFE Alu 18015.00 425.00 +2.42 17160.00 4.98 SHFE Cu* 72810.00 1280.00 +1.79 59900.00 21.55 SHFE Zin 18900.00 370.00 +2.00 21195.00 -10.83 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

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