UPDATE 5-Strong dollar weighs on copper, nickel jumps 6.7 pct

(Updates prices, adds comments)

By Humeyra Pamuk and Anna Stablum

LONDON, June 10 (Reuters) - A strong dollar knocked copper
prices lower on Tuesday, while nickel jumped almost 7 percent as
a gas explosion in Australia raised concerns over this year's
output, traders and analysts said.

In other metals, zinc fell to a 2-1/2-year low on poor
fundamentals with a market surplus expected this year and tin
shed more than 4 percent on technical selling.

Copper for three-months delivery on the London Metal
Exchange MCU3 ended at $7,870 per tonne, down 1.4 percent from
the last quote of $7,980/7,985 on Monday.

In New York, copper for July delivery HGN8 was trading
down 5.30 cents to $3.5600 a pound by 1558 GMT.

Copper has been depressed since touching a record of $8,880
per tonne in mid-April, with the market focusing on movements in
currency markets in the absence of any fresh impetus.

"When we're talking about short term, it's entirely a dollar
story," said Gary Mead, senior commodities analyst at Virtual
Metals. "A dollar story which is based really upon the remarks
of Ben Bernanke."

The dollar set a 3-1/2-month high against the yen on Tuesday
after Federal Reserve Chairman Ben Bernanke raised his
anti-inflationary language, stoking expectations for U.S.
interest rate rises. [ID:nN10334235]

A firm dollar makes industrial metals more expensive for
other currency holders.

Nickel MNI3 rose 6.7 percent to touch an intraday high of
$23,420 before ending at $23,390, up $1,440, with possible
production losses prompting a short covering rally.

Australian miners Minara Resources Ltd (MRE.AX: Quote, Profile, Research) and Newcrest
Mining Ltd (NCM.AX: Quote, Profile, Research) said a gas outage after last week's
explosion at a supplier's plant will impact their full-year
production forecasts. [ID:nSYD117278]

Stocks in LME warehouses are down by almost 10 percent since
the start of May, but at the same time stainless steel demand --
70 percent of nickel's offtake goes to this market -- has eased.

"While the ongoing trend of LME stock outflows and reduced
output at Murrin Murrin are supportive, nickel prices remain
weighed by a market surplus ... and subdued stainless steel
demand," analyst Michael Jansen at JP Morgan said in a report.

TIN AND ZINC DROP

Zinc MZN3 fell 3.9 percent to an intraday low of $1,905 a
tonne -- its lowest level since early January 2006 -- and the
metal has lost some 20 percent so far this year.
It was last indicated at $1,934, down $49 or 2.5 percent on
arbitrage-related selling and poor fundamentals.

"The metal had gone up in the last weeks because of the
price difference between Shanghai and the LME, now it's evened
out again ... Funds have been negative on that one for a while,"
an LME trader said.

Another trader said expectations of supply coming onstream
in the next few years and lack of demand weighed on prices.

"There's plenty of it around," another LME trader said.

Tin MSN3 fell 4.5 percent to $21,100 -- the lowest since
April 16 -- before closing at $21,375, down $725 from Monday.

"Tin has repeatedly failed to breach an important resistance
level of $22,012," analyst David Thurtell at BNP Paribas said,
adding this had triggered some selling.

Physical tin traders said the metal had found a floor at
around $20,000 to $21,000, with concerns about Indonesian
exports underpinning the market. [ID:nL109526]

Aluminium MAL3 gained $3 to $2,955 per tonne and lead
MPB3 was higher at $1,965 versus $1,958/1,960.

Metal Prices by 1554 GMT:
Metal Last Change Pct Move End 2007 Ytd Pct

move
LME Cu 7865.00 -115.00 -1.44 6670.00 17.92
SHFE Cu* 59960.00 -680.00 -1.12 56880.00 5.41
LME Alum 2952.00 0.00 +0.00 2403.00 22.85
SHFE Alu* 18910.00 50.00 +0.27 18180.00 4.02
COMEX Cu** 355.35 -5.80 -1.61 303.50 17.08
LME Zinc 1933.00 -50.00 -2.52 2370.00 -18.44
SHFE Zinc* 16085.00 -595.00 -3.57 18950.00 -15.12
LME Nick 23390.00 1440.00 +6.56 26350.00 -11.23
LME Lead 1965.00 7.00 +0.04 2550.00 -22.94
LME Tin 21350.00 -750.00 -3.39 16400.00 30.18
** 1st contract month for COMEX copper
* 3rd contact month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07

(Editing by Christopher Johnson)