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METALS-Copper heads for biggest weekly drop since early May

* LME/ShFE arb: http://tmsnrt.rs/2oQ5nm2

* Copper eyes weekly fall on U.S. interest rates

* Chinese data solid this week but investment cools (Updates throughout, changes dateline from MELBOURNE)

LONDON, June 16 (Reuters) - Copper edged up on Friday but was on track for its biggest weekly drop since early May as markets priced in a higher U.S. interest rate environment that would support the dollar.

Benchmark copper on the London Metal Exchange had risen 0.2 percent to $5,669.50 a tonne by 0943 GMT, but was down more than 2 percent so far this week.

"The hawkish tone from the Fed has sapped some of the interest for commodities in general and copper also," said Ole Hansen, head of commodity strategy at Saxo Bank.

"The dollar is starting to show some teeth again and that adds to the reduced demand for commodities."

FED: The U.S. Federal Reserve raised interest rates this week and indicated further tightening before the year-end, boosting the dollar and making commodities priced in the greenback more expensive for holders of other currencies.

CHINA: Data this week showed that China's economy generally remained on a solid footing in May, but tighter monetary policy, a cooling housing market and slowing investment reinforced views that it will gradually lose momentum in coming months.

STEEL: Chinese steel futures rose sharply for a third straight session, supported by government efforts to tackle a glut, even as the outlook for demand in the world's top steel consumer may not be too promising, particularly from its property sector.

ZINC: Supportive steel prices lifted benchmark zinc by 1.4 percent to $2,540 per tonne, regaining most of this week's losses.

NICKEL: Nickel edged up 1.4 percent to $8,975 per tonne, trailing steel. Nickel this week touched its lowest level since June 2016 but is set to end the week barely changed.

ALUMINIUM: LME aluminum inched 0.2 percent higher to $1,875 per tonne after touching its lowest in over a month in the previous session. Aluminum is on track for its third straight weekly decline.

U.S. JOBLESS: The number of Americans filing for unemployment benefits fell more than expected last week, pointing to shrinking labor market slack that could allow the Federal Reserve to raise interest rates again this year despite moderate inflation growth.

EXCHANGE EXPANSION: CME says New York Mercantile Exchange Inc and Commodity Exchange Inc plan to expand the location for the storage and delivery of zinc delivered against the zinc futures contract to Europe and Asia.

PRICES: Tin slipped 0.3 percent to $19,450 per tonne while tin added 1 percent at $19,450.50.

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(Additional reporting by Melanie Burton and James Regan; Editing by Dale Hudson)