METALS-Copper edges up on fund buying, capped by China tariff worries

Recasts with prices at 1700 GMT

By Eric Onstad

LONDON, Jan 8 (Reuters) - Copper prices extended gains for a fifth session on Wednesday as some funds dipped into the market, but a strong dollar and uncertainty about potential tariffs on the world's biggest metals consumer China kept the rise in check.

Three-month copper CMCU3 on the London Metal Exchange (LME) was up 0.4% at $9,041 per metric ton by 1700 GMT, having bounced after touching a five-month low of $8,757 last week.

U.S. Comex copper futures HGc2 gained 1.3% to $4.23 a lb.

"The market is really trying to understand how aggressive these potential tariffs could be and I think the problem is no one really knows the answer," said Nitesh Shah, commodity strategist at WisdomTree.

Many investors were on the sidelines after conflicting reports about plans by U.S. President-elect Donald Trump regarding tariffs.

During the campaign Trump vowed to impose tariffs of 60% on Chinese imports, but Trump on Monday denied a Washington Post report that said his aides were exploring plans that would only cover critical imports.

Alastair Munro, senior base metals analyst at Marex, said copper found some support from contrarian buying from some Commodity Trade Advisor (CTA) investment funds, which are largely driven by computer programs.

A bright spot for copper was a firm Yangshan copper premium SMM-CUYP-CN, which reflects demand for copper imported into China. It was last at $70 per ton, up from $43 two months ago.

A firmer dollar index .DXY, however, boosted by strong U.S. data, weighed on metals markets, making commodities priced in the U.S. currency more expensive for buyers using other currencies. FRX/

LME zinc CMZN3 was the worst performer, sliding 1.7% to $2,827.50 a ton, having touched its weakest in nearly four months.

Munro said the weakness was largely due to selling linked to index rebalancing flows, a five-day monthly process that kicked off on Wednesday.

Among other metals, LME aluminium CMAl3 dropped 0.5% to $2,504 a ton and lead CMPB3 lost 0.9% to $1,938.50 while nickel CMNI3 rose 0.2% to $15,435 and tin CMSN3 added 0.4% to $30,055.

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(Reporting by Eric Onstad; Editing by Kirsten Donovan and Elaine Hardcastle)

((eric.onstad@thomsonreuters.com; +44 20 7542 7093; Twitter https://twitter.com/reutersEricO; Reuters Messaging: eric.onstad.thomsonreuters.com@reuters.net))

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