* Dollar .DXY weakens against a basket of currencies * Copper stocks fall again, boosting sentiment * Fears easing about Chinese monetary tightening (Updates prices) By Rebekah Curtis LONDON, Feb 3 (Reuters) - Copper rose on Wednesday, as improving U.S. economic data boosted investors' confidence that OECD demand for industrial metals could start to pick up. Copper for three-month delivery MCU3 on the London Metal Exchange was at $6,871.5 a tonne in rings from Tuesday's $6,820. A broadly weaker dollar .DXY also supported metals, making dollar-priced commodities cheaper for non-U.S. investors. [FRX/] But copper lost grip of its intraday high of $6,948, as the dollar pared some of its early losses. Upbeat U.S. data included Tuesday's home sales numbers, Monday's manufacturing figures and economic growth data on Friday. [ID:nN02203495] [ID:nN01363414] [ID:nN28120005] Investors are scouring for signs of economic improvement after the economic crisis hammered Western demand for base metals, leaving China as a vital support for the market. "It feels like a more positive environment than it did," said Stephen Briggs, analyst at RBS. "The economic data that came out on Monday was a driving force allowing metals to stabilise and then recover," he added. "This week they'll continue to claw back a little bit of the losses of the last couple of weeks." Global stock markets also rallied, as the data and strong U.S. corporate earnings bolstered risk appetite. [MKTS/GLOB] MONETARY POLICY Base metals prices bounced also because investors' concerns about monetary tightening in China were starting to ease. Copper was hit in late January by investors fears that signs of monetary tightening in China could hit demand from the world's top consumer of industrial metals. "China's macro environment has changed from one predominantly focused on growth to one where balancing growth and inflation has become increasingly important to policymakers," Barclays Capital said in a note. "Given China's importance to key commodity markets, these moves have had a noticeable impact on sentiment." But many analysts said these fears had been overdone and that Chinese demand was still robust. Stoking the positive sentiment, stocks of copper at LME warehouses fell for a second day in a row, breaking a trend of nearly constant rises since mid-July. Stocks last fell 675 tonnes to 540,475 tonnes. At the end of last week copper inventories rose to about 543,500 tonnes to hit their highest level since last February. Stocks of aluminium MAL3, used in transport and packaging, dropped 6,600 tonnes, but held near a record high above 4.6 million tonnes. A large portion of those aluminium stocks are tied up in finance deals, to release cash for producers and to earn banks higher returns than they would get in money markets. [ID:nGEE5BA277] Aluminium traded at $2,118 in rings from $2,120. Zinc MZN3 was at $2,175 from $2,160, while battery material lead MPB3 was quoted at $2,120/2,125 from $2,118. Tin MSN3 was quoted at $16,550/16,575 from $16,450 and steel-making component nickel MNI3 was quoted at $18,195/18,200 from $18,300. Metal Prices at 1310 GMT Metal Last Change Pct Move End 2009 Ytd Pct move COMEX Cu 308.50 0.00 +0.00 332.75 -7.29 LME Alum 2111.00 -9.00 -0.42 2230.00 -5.34 LME Cu 6835.00 15.00 +0.22 7375.00 -7.32 LME Lead 2116.00 -2.00 -0.09 2432.00 -12.99 LME Nickel 18150.00 -150.00 -0.82 18525.00 -2.02 LME Tin 16350.00 -100.00 -0.61 16950.00 -3.54 LME Zinc 2161.00 16.00 +0.75 2560.00 -15.59 SHFE Alu 16560.00 345.00 +2.13 17160.00 -3.50 SHFE Cu* 55820.00 1540.00 +2.84 59900.00 -6.81 SHFE Zin 17985.00 830.00 +4.84 21195.00 -15.15 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Editing by Sue Thomas)

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