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METALS-Copper steadies after hitting near two week low on strong dollar, oil slide

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* LME/ShFE arb - http://tmsnrt.rs/2oQ5nm2 (Recasts, updates prices, adds details/quote; changes dateline)

LONDON, June 21 (Reuters) - Copper steadied on Wednesday after hitting a near two week low as a strong dollar and a sharp decline in oil prices weighed, but losses were limited by signs of tightening supply.

The dollar steadied versus a currency basket after touching a five-week peak on Tuesday, while oil fell to seven-month lows, set for its largest price slide in the first half of any year for the past two decades.

A strong dollar makes dollar-priced metals costlier for non-U.S. investors while sliding oil prices can deter investors from commodity basket funds that include metals. They also reduce costs for miners and smelters.

"A lot of (the decline) has to do with broader commodity market correlations... (and with) the Federal Reserve being more hawkish," said Nitesh Shah, commodity strategist at ETF Securities.

He added, however: "The fundamentals look pretty strong. There's likely going to be a deficit this year. The (supply) issues we saw in the beginning of the year with Grasberg and Escondida haven't been resolved ...they will resurface."

* LONDON COPPER: Three-month copper on the London Metal Exchange edged up 0.3 percent to $5,674 a tonne by 1005 GMT, having hit its lowest since June 8 earlier at $5,630.

* COPPER SUPPLY: The global world refined copper market showed a 5,000 tonnes deficit in March, compared with a 102,000 tonnes surplus in February, industry data showed on Tuesday.

* ALUMINIUM: Aluminium fell 0.7 percent to $1,873.

"A large part of the potential production cuts in China should already be priced into the current high aluminum price. Aluminum has outperformed all other base metals (this year), despite what we see as an amply supplied market," said Commerzbank in a note.

* ZINC: Zinc rose 1.4 percent to $2,589.5, having touched its highest since June 1 earlier at $2,591.50, bolstered by concerns over tightening supplies, though these have been offset somewhat by worries over Chinese steel demand.

* NICKEL: LME nickel rose 1.3 percent to $8,935, following a 2.1 percent slide Tuesday that came in the face of news earlier in the week that about a dozen Indonesian nickel smelters have stopped operations because of a plunge in prices.

* For the top stories in metals and other news, click TOP/MTL or MET/L ($1 = 6.8318 Chinese yuan)

(Additional reporting by James Regan; Editing by Elaine Hardcastle)