METALS-Nickel gains capped by caution over high inventories

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

* Copper, nickel set to end week lower (Updates throughout, changes SYDNEY dateline)

SYDNEY, Nov 17 (Reuters) - Nickel and copper led the base metals complex higher on Friday, supported by a softer dollar, though both metals remained on track for weekly declines.

Benchmark copper on the London Metal Exchange was up 0.6 percent at $6,778 a tonne by 1130 GMT and nickel had added 1.5 percent to $11,525.

Nickel, mainly used in stainless steel, rallied to a two-year high this month on its expected use in electric vehicles, but prices have since pulled back because of high inventories.

ING commodities strategist Warren Patterson said the base metals complex was undergoing a price correction, with help from Friday's weaker dollar.

"The nickel market got a bit ahead of itself, rallying as much as it did, given that we still have a lot of inventory to draw down before it becomes an overly bullish story," he added.

INVENTORIES: On-warrant inventories of copper <MCUSTX-TOTAL> -- those not earmarked for delivery -- fell by 6,925 tonnes to 148,250 after fresh cancellations.

On-warrant nickel stocks fell by 7,302 tonnes to 246,504 tonnes. That helped prices on the day, but they are still flat on the year.

EV DEMAND: Wood Mackenzie analysts estimate nickel demand in electric vehicle (EV) batteries will rise to about 220,000 tonnes in 2025 from about 40,000 tonnes last year.

DOLLAR: The dollar index slipped to a four-week low after the Wall Street Journal reported that investigators looking at possible Russian interference in the 2016 U.S. election had subpoenaed President Donald Trump's election campaign for documents.

COPPER TECHNICALS: The next major support for copper is $6,675 a tonne with resistance into $6,850, Marex Spectron said in a note.

COPPER: A fire broke out at the main port used by copper miner Freeport-McMoRan Inc in Papua, Indonesia, on Thursday night, the company said, adding that the incident would not affect shipments.

Villagers near the Freeport mine were evacuated after a string of shootings.

BHP BILLITON: The world's biggest mining company BHP Billiton is seeking a buyer for its nickel business in Australia, it said on Thursday.

ALUMINIUM: Expected capacity cuts in China and falling inventories in LME-approved warehouses helped to lift alluminium by 0.4 percent to $2,110 a tonne, on track to end the week nearly half a percent higher after shedding almost 4 percent last week.

PRICES: Lead rose 0.7 percent to $2,420 a tonne, tin inched up 0.6 percent to $19,470 and zinc gained 0.6 percent to $3,162.

(Additional reporting by James Regan IN SYDNEY; Editing by David Goodman)