* LME/ShFE arb: http://bit.ly/2wZSAEz (Adds closing prices)
LONDON, Feb 16 (Reuters) - Copper edged up on Friday, posting its biggest weekly gain in more than a year as the dollar hovered near three-year lows, while zinc climbed on depleting stocks.
Benchmark copper on the London Metal Exchange ended 0.7 percent higher at $7,233 a tonne. The metal, used in power and construction, finished nearly 7 percent higher on the week in its best performance since November 2016.
"The return of risk appetite that we are seeing through a strong rebound in stock markets, inflation expectations and the weaker dollar has been supportive for industrials," Saxo Bank analyst Ole Hansen said.
DOLLAR: The dollar edged higher but was still near three-year lows against a basket of currencies, headed for its biggest weekly loss in two years, as bearish factors offset support the U.S. currency could take from rising Treasury yields.
The U.S. currency has been weighed down by a variety of factors, including concerns that Washington might pursue a weak-dollar strategy and the perceived erosion of its yield advantage as other countries start to scale back easier monetary policy.
A weaker dollar benefits dollar-priced commodities by making them more affordable for buyers paying with other currencies.
MANUFACTURING: U.S data showed an unexpected dip in industrial production last month, but analysts said the focus was on next week's round of data.
"Industrial production data out of the U.S. was slightly disappointing but it didn't spill over into the copper markets," Danske Bank analyst Jens Pedersen said.
"The market will look into next week, where we get the next round of manufacturing PMIs, which will be an important gauge for the market to assess how global industrial activity is doing."
ZINC STOCKS: Zinc stocks <MZN-STOCKS> saw an outflow of 2,700 tonnes to 151,650 tonnes, bringing inventories to their lowest since 2008.
PROCESSING FEES: Global zinc miners and smelters failed to reach any benchmark deal on 2018 processing terms at an industry gathering this week, and any agreement is likely to be delayed by a month or more as participants haggle over prospects for growing supply in the second half, two industry sources said.
ZINC PRICES: LME zinc ended 0.1 percent higher to $3,575 a tonne, and clocked its best week since August 2017.
PRICES: Aluminium rose 2 percent to $2,208, lead shed 0.2 percent to $2,613, tin ended 0.8 percent higher at $21,750 and nickel slipped 1.6 percent to $13,920.
(Additional reporting by Melanie Burton in MELBOURNE; Editing by Dale Hudson and Alexander Smith)