METALS-Copper hits one-month high on optimism over China demand

* Copper rises to highest since Sept. 8 at $6,903/T

* LME/ShFE arb: http://bit.ly/2wZSAEz

* GRAPHIC-2017 metal returns: http://tmsnrt.rs/2eqHKkL (Updates prices)

LONDON, Oct 12 (Reuters) - Copper prices hit their highest in more than a month on Thursday as optimism over the demand outlook from major consumer China fuelled buying.

Solid demand in China has opened the "arbitrage window" for copper imports, traders said. Premiums for copper held in China's bonded zones have climbed by $9 this week to $74, the highest in more than two months. <CU-BMPBW-SHMET>

"There is a lot of momentum investor interest (in copper)," Capital Economics analyst Caroline Bain said. "And (there is) some optimism about demand ... chiefly in China."

Many metals market participants are awaiting the outcome of China's Communist Party Congress next week, she said, for an indication of broader policy initiatives and their implications for metals demand.

* LME COPPER: London Metal Exchange copper was up 1.4 percent at $6,893.50 a tonne at 1450 GMT. Prices earlier hit their highest since Sept. 8 at $6,903, and were edging towards a three-year peak of $6,970 hit on Sept. 5.

* COPPER STOCKS: Stocks of copper in LME warehouses <MCU-STOCKS> fell by another 1,025 tonnes, exchange data showed on Thursday. They are now down 9 percent from mid-September's two-month peak.

* NICKEL: LME nickel was at $11,375 a tonne, up 2.2 percent, having touched a three-week peak of $11,415.

* ZINC AND LEAD: LME zinc was up 1.2 percent at $3,258.50 a tonne, while lead was 0.2 percent higher at $2,569 a tonne. The latter was held in check by prospects of rising supply after a Chinese smelter said it had restarted production.

* ZINC BACKWARDATION: The premium of cash zinc over the three-month contract <MZN0-3> stood at a 10-year high of $80 a tonne, indicating shortages in immediately available supply.

* MMG: MMG Ltd, the international mining unit of state-owned China Minmetals Corp, has become China's preferred developer of overseas projects and is looking at acquisitions beyond its core strengths of copper and zinc, MMG's chief executive said.

* FINANCIAL MARKETS: The dollar recovered on Thursday, having hit its lowest in more than two weeks as U.S. central bankers showed they were taking a more guarded view of inflation.

* U.S. INTEREST RATES: Fed policymakers had a prolonged debate about the prospects of a pickup in inflation and slowing the path of future interest rate rises if it did not, according to the minutes of the U.S. central bank's last policy meeting.

* OTHER METALS: LME aluminium was 0.7 percent higher at $2,145 a tonne, while tin was down 0.3 percent at $20,815 a tonne.

(Additional reporting by Melanie Burton in Melbourne; Editing by Dale Hudson)