MT:London copper strikes 11-day high as dollar drops
* Speculators add to bearish copper positions - CFTC data
* Dollar index hangs on key support; metals could swing higher
* U.S. markets closed on Monday for Presidents' Day holiday
(Adds comment, detail, updates prices)
By Melanie Burton
SYDNEY, Feb 17 (Reuters) - London copper hit its highest in almost two weeks on Monday as soft U.S. manufacturing data dragged down the dollar and sent short-position holders scuttling for cover.
Cooling growth in the United States and China has curbed demand for metals. This has encouraged some investors to bet on falling prices, leaving them vulnerable to currency movements.
A weaker dollar makes commodities more affordable for holders of other currencies.
"USD weakness is driving all the commodities this morning," said analyst Tim Radford of Sydney-based advisor Rivkin.
Data showing U.S. manufacturing output in January recorded its biggest drop in more than 4-1/2 years and soggy growth in China is keeping a lid on prices, but further dollar losses could spark short-term gains, Radford said. [ID:nL2N0LJ0XC]
"From a technical standpoint, the dollar index is at a key level of support around 79-80. If it does break that level ... there is upside to be had," Radford added.
Three-month copper on the London Metal Exchange had climbed 0.41 percent to $7,179.25 a tonne by 0231 GMT after earlier hitting $7,194.75 - its loftiest since Feb. 6.
Prices, which were little changed last week, have cut the year's losses to less than 3 percent from 4 percent at the end of January.
There is no major data scheduled for Monday with U.S. markets shut for Presidents' Day holiday.
The most-traded April copper contract on the Shanghai Futures Exchange rose more than half a percent to 50,930 yuan ($8,400) a tonne.
The dollar fell to its lowest since Jan. 1 against a basket of currencies <.DXY>. Slightly stronger-than-expected growth in Germany and France that pushed the euro zone's recovery up a gear in the fourth quarter also hurt the dollar. [ID:nL5N0LJ1J6]
The copper market is now waiting for preliminary readings of manufacturing health in China this week for signs the top metals user is ramping back up after Lunar New Year.
The big debate about how fast China's economy will grow this year can find some answers in the real world, where signs suggest the growth giant is slowly but surely losing its fizz. [ID:nL3N0LH4K8]
Hedge funds and money managers increased net shorts in copper futures and options by 8,691 lots to 15,792 contracts, their most bearish since the week of Dec. 8., Commodity Futures Trading Commission data showed on Friday. [ID:nL2N0LJ1MM]
European PMIs are also due, and analysts will be looking at the minutes of the Jan. 29 Federal Open Market Committee meeting for clues on the country's stimulus tapering program.
On the supply side, traders are keeping an eye on news out of Chile, where workers at state copper miner Codelco's central El Teniente mine narrowly rejected the company's early contract offer, deferring collective labour negotiations to October. [ID:nL2N0LJ0S3]
