(Updates with official prices)
LONDON, Oct 10 (Reuters) - Copper prices rose on Thursday after reports the United States could reach a currency pact with China and suspend a tariff hike planned for next week, easing a trade dispute that has dragged down economic growth and metals prices.
Benchmark copper on the London Metal Exchange (LME) traded up 0.8% at $5,731 a tonne in official rings. It touched its lowest level in more than two years on Sept. 3 of $5,518.
"There's a lot of volatility in industrial metals markets linked to the tos and fros of the trade negotiations," said WisdomTree analyst Nitesh Shah.
But he said a supply deficit that is likely to worsen in coming years will likely support prices even if demand growth for copper weakens.
TRADE WAR: The United States' and China's top trade negotiators were set to meet on Thursday for the first time since late July.
Bloomberg reported, citing sources, that the United States is weighing a currency pact with China as part of a partial deal that could include a suspension of planned tariff increases.
Sources told Reuters Beijing had lowered expectations for significant progress from the talks after the U.S. blacklisting of Chinese companies and suspension of U.S. visas for some Chinese officials.
The South China Morning Post newspaper also reported that the two sides had made no progress in deputy-level trade talks held on Monday and Tuesday.
DOLLAR/YUAN: The dollar weakened against currencies including China's yuan, making metals cheaper for non-U.S. buyers and supporting demand.
CHINA STIMULUS: China's cabinet announced steps on Tuesday to ease growing fiscal strains on local governments amid a push to cut taxes to support the slowing economy.
PERU COPPER: Operations at Las Bambas, one of Peru's largest copper mines, are being affected by blocked roads disrupting supplies since Sept. 22 during anti-mining protests.
NICKEL: Nickel traded up 1.4% at $17,605 a tonne after headline stocks in LME-registered warehouses fell to 102,696 tonnes, the lowest since April 2012. <MNISTX-TOTAL>
Prices reached $18,850 on Sept. 2, the highest since 2014, after top producer Indonesia said it would ban ore exports from next year.
POSITIONING: Speculators are betting on further price rises, with the net long in LME nickel at 42% of open contracts, according to brokers Marex Spectron.
COLUMN: The LME stocks grab is feeding nickel's raging bull fires, writes Andy Home.
PHILIPPINES: The Philippines has lifted the suspension of nickel miner Zambales Diversified Metals Corp.
OTHER METALS: LME zinc traded up 3% at $2,358.50 a tonne and lead was bid 1.7% higher at $2,166. Aluminium was bid down 0.2% at $1,741 and tin was bid 0.3% lower at $16,400.
(Reporting by Peter Hobson; Additional reporting by Mai Nguyen; Editing by Kirsten Donovan and Alexandra Hudson)