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RTRS: METALS-Copper dips on profit taking, China demand supports
 
* Dollar index hits fresh seven week high on rate hike bets

* Escondida strike turns violent as protesters battle police

* Strike continues at Noranda zinc processing plant, Canada (Recasts, adds quote/detail, updates prices, changes dateline)

By Maytaal Angel

LONDON, March 2 Copper dipped on Thursday as a firmer dollar weighed and recent gains tempted bullish investors to book profits, though improved manufacturing reports in China and elsewhere brightened the demand outlook.

China's factory activity expanded faster than expected in February as domestic and export demand picked up, adding to signs the global economy is gaining momentum even as fears grow of a surge in U.S.-led trade protectionism.

Weighing on dollar-priced commodities, however, the dollar index hit a fresh seven week high on growing expectations the U.S. central bank will raise interest rates this month.

"Its not surprising to see from time to time profit taking (in copper) since the situation is tightening but probably not as tight as is already priced in," said Commerzbank analyst Eugen Weinberg.

London Metal Exchange copper fell 0.3 percent to $5,997.50 a tonne at 1117 GMT, having hit its highest since Feb. 21 in the previous session.

Supply disruptions in Chile and Indonesia, where Freeport-McMoRan has been unable to export copper concentrate since mid-January, pushed copper to 21-month highs last month.

On Wednesday, the strike at Chile's Escondida copper mine, the world's biggest, turned violent when a group of striking workers blocked a highway.

In demand-side news, U.S. manufacturing rose in February to its highest since 2014, while January inflation recorded its biggest monthly increase in four years, raising the probability of a rate hike this month.

Although higher rates would raise costs for companies, they are being seen as a sign of confidence in the economy.

"Given good data we would not be surprised to see prices continue higher. Effervescent equity markets mean ... there are risks of reality checks, but until then the path of least resistance is to the upside," said FastMarkets in a note.

In zinc news, Noranda Income Fund is deferring its 2017 zinc production and sales forecasts due to an ongoing strike by workers at its Quebec processing plant, the second-largest in North America.

Meanwhile, China has ordered steel and aluminium producers in 28 cities to slash output during winter as Beijing intensifies its war on smog, a policy document shows.

LME aluminium prices rallied 1.3 percent on Wednesday to hit the highest in more than 20 months at $1,957. Prices on Thursday retraced some of those gains to $1,939.50.

Source