(Updates closing prices)

By Pratima Desai and Michael Taylor

LONDON, Aug 17 (Reuters) - Expectations of strong physical
demand and a weaker dollar drove copper to a one-week high on
Tuesday, despite growing doubts about economic growth prospects
in the United States, the world's largest economy.

Attention was also focused on premiums for aluminium for
nearby delivery due to tight supplies and dominant holdings of
warrants on stocks of the metal in London Metal Exchange
warehouses and cash contracts.

Benchmark copper on the LME closed at $7,382 a tonne from
$7,250 a tonne at the close on Monday.

The metal, used in power and construction, touched $7,405 a
tonne earlier on Tuesday. It hit a three-month peak of $7,527 a
tonne on Aug. 4.

Industrial metal prices in recent days have come under
pressure from U.S. economic data, showing signs of faltering
growth, but losses have been limited.

"The macro data has been poor across the board ... we're
getting a little toppy here," said Edward Meir, energy and
metals analyst for MF Global in New York. "I'm looking for a
pullback later in the week.

"The market is really focusing on the stock picture, which
is falling across the board and getting quite tight in a number
of metals."

As of Aug. 16, stocks of copper in LME warehouses stood at
405,025 tonnes, a fall of about 25 percent since mid-February.

Cancelled warrants -- material already tagged for delivery
-- on LME copper stocks stand at 6.75 percent of total stocks
from around 5.5 percent a week ago. That is an indication of
stronger demand.

"This should mean that copper stocks on the LME will fall
below the 400,000 tonne mark for the first time since November
2009 soon," Commerzbank said in a note.

PICTURE

The weaker U.S. currency makes dollar-denominated metals
cheaper for holders of other currencies.

Part of the reason behind dollar weakness has been data,
showing U.S. economic recovery could be losing momentum. This
has capped price gains.

U.S. home builders' optimism hit a near 1-1/2 year low in
August, and a regional manufacturing gauge grew more slowly than
expected on Monday.

Bucking the trend on Tuesday, U.S. industrial production
expanded in July, helping offset weak housing starts numbers.

Markets are also watching developments in China, the world's
largest consumer of industrial metals.

Growth in the country is expected to slow but not to levels
where metals demand will deteriorate significantly. That will
bolster base metal prices.

"The downside may be limited as China passes its seasonal
lull and as the market expects solid demand in the fourth
quarter," ANZ said in a note.

Focus is also on aluminium trading, where large amounts have
recently been offered and bought. There is a premium of $5 a
tonne for material for delivery on Wednesday compared with
material for delivery on Thursday -- know as tom/next.

Nearly 34,000 lots or about 850,000 tonnes of aluminium
changed hands in tom/next trade so far on Tuesday.

The premium or backwardation in the market overrun with
supply is attracting aluminium to LME warehouse.

Stocks rose 70,825 tonnes to above 4.4 million tonnes on
Aug. 16.

"Backwardation will attract material. Rumours are that
500,000 to 1 million tonnes will be delivered in the next few
days," a metals trader said.

Aluminium closed at $2,141 a tonne from $2,118 on Monday,
zinc at $2,123 from $2,073.

A physically backed aluminium exchange-traded product (ETP)
planned by Glencore International and Credit Suisse is likely to
be launched on a Swiss exchange, a source familiar with the
matter said.

Tin at $21,350 from $21,100, nickel at $21,950 from $21,550,
and lead was untraded but last bid at $2,130 from $2,095 on
Monday. Tin earlier hit $21,650, its highest since August 2008.

Metal Prices at 1608 GMT

Comex copper in cents/lb, LME prices in $/T and SHFE prices in
yuan/T
Metal Last Change Percent Move End 2009
Ytd Percent

move
COMEX Cu 334.35 6.40 +1.95 334.65 -0.09
LME Alum 2140.00 22.00 +1.04 2230.00 -4.04
LME Cu 7385.00 135.00 +1.86 7375.00 0.14
LME Lead 2130.00 35.00 +1.67 2432.00 -12.42
LME Nickel 21950.00 400.00 +1.86 18525.00 18.49
LME Tin 21150.00 50.00 +0.24 16950.00 24.78
LME Zinc 2121.00 48.00 +2.32 2560.00 -17.15
SHFE Alu 15530.00 35.00 +0.23 17160.00 -9.50
SHFE Cu* 57750.00 450.00 +0.79 59900.00 -3.59
SHFE Zin 17345.00 180.00 +1.05 21195.00 -18.16
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07

(Editing by Jane Baird)