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METALS-Nickel rises as dollar slips and steel prices rally

* LME/ShFE arb: http://bit.ly/2wZSAEz (Updates throughout, changes dateline from MELBOURNE)

LONDON, Oct 9 (Reuters) - Nickel touched its highest level in more than two weeks on Monday, supported by a softer dollar and higher steel prices, while shrugging off weak data from top metals consumer China.

Benchmark nickel on the London Metal Exchange rose 2.3 percent to $10,845 per tonne, its highest level since Sept. 21 and on track for its biggest intraday jump since Aug. 21.

Higher steel prices offset data showing activity in China's services sector grew at its slowest pace in 21 months in September, casting doubt on the economic growth of the world's top metal's consumer.

"A bit surprising increase in prices given the weaker Chinese data," said ETF Securities commodity strategist Nitesh Shah, adding the market was also monitoring news on fresh supply from Indonesia and Philippines.

Nickel markets are heavily influenced by steel prices since they are mainly used in the steel sector.

Chinese steel rebar futures jumped nearly 3 percent as investors anticipated production cuts in the world's top steel producers.

INVENTORIES: Nickel stocks in LME-registered warehouses fell by 1,638 tonnes to 384,864 tonnes while on-warrant stocks - those earmarked for delivery - fell 576 tonnes to 249,336 tonnes.

INDONESIA: Indonesia's mining minister said a "special mining permit" that was allocated to Freeport Indonesia earlier this year had been extended for the next three months.

DOLLAR: The dollar index edged lower on Monday against a basket of major currencies, supporting commodities priced in the greenback.

TECHNICALS: Marex Spectron's Alastair Munro said nickel resistance is at $10,840 followed by $10,965 which is the 38.2 percent Fibonacci retrace of year-to-date high to low. The market is likely to see stops triggered above the first level.

ZINC: LME Zinc added 0.6 percent to $3,255 per tonne, edging closer to a 10-year-high it hit last week as steel prices strengthened. Meanwhile, Shanghai Futures Exchange zinc rallied to its most expensive since March 2008 at 26,935 yuan ($4,048) a tonne.

ZINC SUPPLY: Concerns about dwindling supply have lit a fire under prices as the closure of several giant mines in recent years has crimped production of the refined metal. In China, Shfe zinc stocks are the lowest since early 2009, just under 65,000 tonnes. <ZN-STX-SGH>

COPPER: Three-month copper slipped 0.2 percent to $6,653 per tonne after touching a near four-week high on Friday.

INVESTORS ON COPPER: Hedge funds and money managers reduced their net long positions in COMEX copper futures and options for the fourth straight week, in the week to Oct. 3, U.S. Commodity Futures Trading Commission data showed on Friday.

(Additional reporting by Melanie Burton in MELBOURNE; Editing by Kenneth Maxwell and Susan Fenton)