UPDATE 7-Base metals rally on soft dlr, technical buying

* Copper prices rally to one-week high

* Short-covering pushes up tin, lead, zinc and nickel

* Soft dollar helps prices higher

(Updates prices to London close)

By Pratima Desai and Anna Stablum

LONDON, Sept 12 (Reuters) - Industrial metals rallied on
Friday, recovering from oversold positions with a soft dollar
offsetting global demand worries and financial market woes.
Copper for delivery in three months MCU3 on the London
Metal Exchange jumped 3.6 percent to $7,180 a tonne, the highest
level since Sept. 5, before closing at $7,122 from $6,930 at the
close on Thursday.

Zinc MZN3 rose 5.9 percent to a high of $1,900, lead
MPB3 hit $1,949 up 5.4 percent, and nickel MNI3 touched
$19,400, rising 4.9 percent as investors covered short
positions. Tin MSN3 rose 4.5 percent to a high of $19,600.

"Markets are still oversold so we are seeing a technical
bounce. Energy prices are higher ahead of the weekend and the
dollar is much weaker today," said analyst Edward Meir at MF
Global brokerage.

The dollar fell on Friday on worries about the fate of
investment bank Lehman Brothers, encouraging traders to book
profits from recent sharp gains. [ID:nLC44544]

A softer U.S. currency makes dollar priced commodities
cheaper for holders of other currencies.

Oil CLc1 rose to around $101.45 a barrel, underpinned by
Hurricane Ike which could threaten oil refineries in the United
States, the world's biggest energy consumer. [ID:nSP42810]
Copper, the metal used widely in the power and construction
industries is down about 20 percent since hitting a record high
of $8,940 a tonne in early July, after which doubts about the
strength of Chinese demand gathered momentum.

"It's a little bit more positive, but right now fundamentals
are pretty poor. We're not looking for a meaningful sustained
recovery in industrial metals near term," UBS commodities
analyst Daniel Brebner said.

"Over the next month or two we are going to see an inflexion
point in commodities prices and we are not going to see the same
downward pressure moving towards the end of the year."

Part of the reason behind improving sentiment is the end of
the Olympics in China, where clampdowns on manufacturing
activity in the run up and during the games to improve air
quality further dampened a seasonally weak quarter for demand.

Short position -- bets on lower prices -- covering by short
term investors and bank proprietary traders will also help.

"Short positions in metals are closing out and new buying is
expected from China following the Olympics," said John Meyer,
analyst at Fairfax.

Another bonus for the market was the strength of copper
prices in Shanghai, relative to the LME, with prices high enough
to cover taxes, local premiums, logistics and for importers to
still make a profit, a Barclays Capital report said.

"If this positive arbitrage is sustained ... it points to a
significant pick-up in spot purchasing activity over the coming
months and should result in a move up in China's refined copper
imports going into the fourth quarter," the report said.

The differential could prompt a period of buying by Chinese
consumers to replenish dwindling stocks, which could see large
drawdowns on stocks in LME warehouses.

Copper stocks at above 203,000 tonnes, at their highest
since March last, have also been a negative for the market.

Aluminium MAL3 ended at $2,655 a tonne from $2,620 on
Thursday, zinc MZN3 gained to $1,885 from $1,794 and lead
MPB3 was up at $1,940 from $1,850.

Nickel MNI3 rose to $19,250 from $18,500 and tin MSN3
ended at $19,450 from Thursday's last bid at $18,750.

Metal Prices at 1559 GMT

Metal Last Change Pct Move End 2007 Ytd Pct

move
LME Cu 7135.00 205.00 +2.96 6670.00 6.97
SHFE Cu* 56460.00 980.00 +1.77 56880.00 -0.74
LME Alum 2671.00 51.00 +1.95 2403.00 11.15
SHFE Alu* 16775.00 110.00 +0.66 18180.00 -7.73
COMEX Cu** 322.85 9.40 +3.00 303.50 6.38
LME Zinc 1877.00 83.00 +4.63 2370.00 -20.80
SHFE Zinc* 14500.00 580.00 +4.17 18950.00 -23.48
LME Nick 19175.00 675.00 +3.65 26350.00 -27.23
LME Lead 1926.00 76.00 +4.11 2550.00 -24.47
LME Tin 19225.00 475.00 +2.53 16400.00 17.23
** 1st contract month for COMEX copper
* 3rd contact month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
(Reporting by Pratima Desai; editing by Peter Blackburn)