LONDON - Copper added nearly 3 percent to hit one-week highs on Friday as the dollar eased and inventories dipped, but niggling worries over the extent of the global downturn capped gains.

Investors said price moves were sharpened by lower trading volumes, with markets on holiday across Asia and Europe on Friday, and a holiday in Britain on Monday.

Copper for three month delivery on the London Metal Exchange was last bid at $4 515 a ton from $4 431 at the close on Thursday and compared with a session high at $4 560.

A weaker U.S. currency makes metals priced in dollars less expensive for holders of other currencies.

"There was another big stock withdrawal, and there is the weak dollar too," said Steve Hardcastle, analyst at Sucden Financial.

Prices of the metal used in power and construction rose about 9 percent in April, buoyed by a rise in cancelled warrants – material earmarked for delivery – on stocks in LME warehouses.

Analysts believe the majority of this material is heading for China.

On Thursday, cancelled warrants were 83 100 t from 84 000 t the day before, accounting for about 20 percent of total LME inventories which fell 7 075 t to 398 700 t.

LME inventories in the red metal have fallen about 25 percent or around 140 000 t since late February.

"It all adds up to metal flowing into China and no one really knows the percentage of stockpile and the percentage of consumption," said Hardcastle.

The outflows of LME stock has given some investors hope that the Chinese economy is showing real signs of recovery and could help lead the rest of the world out of recession.

"That has been talked about for a few weeks but China is still an export-led economy and although providing an air of positivity, it's hardly going to save the day," said one LME trader however.

"More likely a bit of short-covering before the long weekend pushing us through technical levels."

ALUMINIUM STOCKS UP

Aluminium gained $24 to trade at $1 518 in LME rings. LME stocks for the metal, used in transport and packaging, jumped 6 075 t to a record 3.79 million tonnes.

On Thursday, aluminium cancelled warrants were at 46 000 t compared with 10 575 t on Jan. 12.

Also on Thursday, Chrysler LLC filed for bankruptcy and announced an industry-changing deal with Fiat.

"It's a bit quiet after a lot of stuff out yesterday," said John Meyer an analyst at investment bank Fairfax. "The Chrysler bankruptcy lifts a lid on some uncertainty. Ironically it's a positive because it means other car makers are much better able to plan for their market.

"While the UK and U.S. continue to suffer economically however, there is a sense that the rest of the world is less affected by the credit crisis."

Chinese manufacturing gained further momentum last month, a survey of executives in charge of purchasing in industries across China showed on Friday, adding to tentative evidence from around the world that the global economy may soon be on the path to recovery.

"The PMI data has helped give a booster from the macro side but more metals specific is the draws in inventory helping to build a more positive underlying picture for the metals," said Gayle Berry, an analyst at Barclays Capital.

Also on the macro front, a flurry of U.S. data will be released later today, including automakers' April sales numbers.

Steel making ingredient nickel traded at $11 625 from $11 650 while battery material lead was at $1 350 from $1 331.

Worries lead supplies persist, due to a dominant position controlling more than 50 percent of cash warrants on LME stocks reflected in the premium for cash material over the three-month contract.

Zinc traded at $1 469 a ton in LME rings from $1 425 and tin edged up to $12 475 from $12 450.

Earlier tin hit $12 650 but worries about supplies persisted and were reflected in the premium for cash over three-month contracts, last indicated at $81 to $99 backwardation.