METALS-Copper off 13-month peak; recovery views support

* Dollar dips, boosting metals

* Investors weigh weak U.S. data, strong corporate earnings

* Zinc touches 16 month peak

(Recasts, adds detail, closing prices)

By Michael Taylor and Maytaal Angel

LONDON, Oct 20 (Reuters) - Copper rose to its highest level in more than a year on Tuesday before retreating on profit taking, with a weak U.S. dollar, strike risks and prospects for economic recovery continuing to offer support.

Zinc, used to galvanise steel, touched $2,155, its highest level in more than 16 months, bolstered by a strike at Volcan (VOL_pb.LM) in Peru. It later ended at $2,128 compared to $2,112 on Monday, clocking up gains of nearly 10 percent this month.

Benchmark copper MCU3 on the London Metal Exchange ended at $6,416 a tonne from $6,465 at the close on Monday. The metal, used in power and construction, earlier touched $6,570, its highest level since September last year.

"The reason we stalled at $6,500 is more technical. There's positive news out on copper, strike action in South America and a weaker dollar," said Daniel Major, analyst at RBS Global Banking & Markets.

The dollar hit a 14-month low against a basket of currencies on Tuesday before recovering on options-related buying. A weak U.S. dollar makes dollar-priced metals cheaper for non-U.S. investors and boosts interest in hard assets over cash. [USD/]

Raising supply concerns, the strike at Chile's Spence copper mine entered its seventh day on Tuesday. [ID:nN16349079]

Also helping metals initially were U.S. stocks, seen as a proxy for economic growth, which were bolstered at the open by strong quarterly results from Apple (AAPL.O) and Caterpillar (CAT.N).

But gains were later erased due to disappointing housing starts and producer price data. [.N] [nN20421973]

Copper prices have more than doubled this year due to improved economic data signalling recovery, record imports from China and increased investor interest in hard assets.

More recently, however, worries over the outlook for demand outside China have limited gains, with analysts citing gains in LME inventories as evidence demand remains weak.

Latest data showed copper stocks rose 550 tonnes to near five-month highs above 357,000 tonnes.

"Inventories remain high," said Fairfax analyst Marc Elliott. "The investment side is sustaining prices above the levels of supply and demand."

"As long as the dollar looks shaky and uncertain, people want to invest in hard assets."

ALUMINIUM UP

Aluminium MAL3, used in transport and packaging, ended at $1,913 a tonne versus $1,945, having earlier touched $1,970, its best level since mid-September.

Limiting gains, aluminium stocks on the LME jumped 35,975 tonnes after falling in recent weeks, standing at near record levels of 4.58 million tonnes. Most of the upswing was delivered to warehouses in Detroit. <LME/STX1> <0#MAL-STX>

Tin MSN3 ended at $14,400 from $14,550.

Worries about short-term tin supplies have been fuelled by a dominant position controlling more than 90 percent of LME stocks and cash contracts. <LME/WC>

That is reflected in the premium for cash material over the three-month contract, which at around $400 a tonne is down from $730 on Sept. 22, but it is still nearly double the levels seen at the end of August.

Steel-making ingredient nickel MNI3 finished at $18,850 from $19,275 while battery material lead MPB3 ended at $2,299 from $2,288.

For an update from mining group Xstrata (XTA.L), click [ID:nLJ123599]

For a story on the U.S. Commodity Futures Trading Commission, click on [ID:nN19395176]

For a factbox on EU plans to cut risk in derivatives markets, click on [ID:nLK607136]

Metal Prices at 1638 GMT Metal Last Change Pct Move End 2008 Ytd Pct

move COMEX Cu 291.65 -4.00 -1.35 139.50 109.07 LME Alum 1910.00 -35.00 -1.80 1535.00 24.43 LME Cu 6390.00 -75.00 -1.16 3060.00 108.82 LME Lead 2285.00 81.00 +3.68 999.00 128.73 LME Nickel 18860.00 -415.00 -2.15 11700.00 61.20 LME Tin 14375.00 -175.00 -1.20 10700.00 34.35 LME Zinc 2130.00 18.00 +0.85 1208.00 76.32 SHFE Alu 15050.00 70.00 +0.47 11540.00 30.42 SHFE Cu* 50210.00 710.00 +1.43 23840.00 110.61 SHFE Zin 16240.00 135.00 +0.84 10120.00 60.47 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

(Additional reporting by Maytaal Angel. Editing by Anthony Barker)