By Chanyaporn Chanjaroen

Sept. 19 (Bloomberg) -- Nickel rose to the highest in almost two months, leading other industrial metals higher in London, after the Federal Reserve made a larger-than-expected interest- rate cut to protect the U.S. from an economic slowdown.

The Fed yesterday trimmed its benchmark rate by half a percentage point, larger than 25 basis points forecast by a survey of 134 economists by Bloomberg News. The cut triggered a decline in the dollar to near an all-time low against the euro and a rally in metals on speculation demand won't contract.

The rally in base metals is attributable to ``one part dollar weakness, one part a prospect of economic growth,'' said Sean Corrigan, chief investment strategist at Diapason Commodities Management, which has $6 billion under management in Lausanne, Switzerland.

The U.S. is the third-largest user of nickel and the second- biggest of copper and aluminum, and a recession may halt a five- year rally in commodity prices. A weaker dollar also makes dollar-denominated commodities cheaper for holders of other currencies. China is the No.1 nickel, copper and aluminum user.

Nickel for delivery in three months on the London Metal Exchange jumped as much as 5.4 percent to $32,400 a ton, its highest intraday price since July 24. It was $1,150 higher at $31,900 as of 9:49 a.m. local time.

Copper advanced $175 to $7,760, after trading at a seven- week high of $7,809. Lead rose $60 to $3,200 and aluminum added $18 to $2,424. Tin gained $140 to $15,150 and zinc was $105 higher at $2,945.

Stocks Gain

Mining stocks soared after the Fed's move. BHP Billiton Ltd., the largest mining company, gained as much as 5.2 percent in London trading. Anglo American Plc jumped 7.3 percent.

LME-traded metals are likely to see limited gains because of continued concern that banks' reluctance to lend may curb investment and metals demand, Corrigan said. Today's advance ``is an immediate reaction; whether it would be economically sensible, it's too early to tell.''

Stockpiles of nickel tracked by the LME dropped 0.7 percent to 29,736 tons, the exchange said today in a daily report. They have more than quadrupled this year. Copper stockpiles increased 0.5 percent to 133,875 tons.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at [email protected]