Recasts, adds comment and changes dateline from Beijing

By Pratima Desai

LONDON, Aug 19 (Reuters) -Copper prices scaled 2-1/2 week highs on Monday with buying spurred by signs of improving demand in top consumer China and a sliding dollar as expectations of an imminent rate cut in the United States mounted.

Physical market copper buyers, particularly in China, have up until recently largely been absent from the market which saw copper prices in May surge to records above $11,100 a ton. A near 20% drop in prices since has seen their return.

Traders said the sliding U.S. currency, which makes dollar-priced metals cheaper for holders of other currencies non-U.S. buyers, was behind the buying by funds which trade using buy and sell signals from numerical models.

Benchmark copper CMCU3 on the London Metal Exchange (LME) was up 1.3% at $9,234 a metric ton at 0942 GMT from an earlier $9,248, the highest since August 1.

"Physical demand is clearly price-sensitive," said Guy Wolf, global head of market analytics at Marex. "It seems a physical bid has appeared at $9,000 for copper, creating a floor."

Recovering demand in China can be seen in stocks of copper CU-STX-SGH in warehouses monitored by the Shanghai Futures Exchange (ShFE) at five-month lows of 262,206.

The Yangshan copper premium SMM-CUYP-CN, an indicator of China's import appetite, at $52 has rallied from numbers below zero in May.

However, also a focus are copper inventories in LME registered warehouses at five-year highs above 300,000 tons and up around 200% since mid-May CU-STX-SGH.

"A renewed investor-led rally in copper and base metals needs time for both catalysts and evidence of a recovery in global manufacturing activity to emerge, along with signs of physical market tightening at lower prices via inventory drawdowns," analysts at Citi said in a recent note.

Elsewhere, aluminium prices CMAL3 hit a one-month high of $2,407 a ton, partly due to dwindling stocks in LME warehouses MALSTX-TOTA and cancelled warrants -- metal earmarked for delivery -- at 60% of the total at 885,375 tons.

Aluminium was up 1.6% at $2,403.

In other metals, zinc CMZN3 gained 1.5% to $2,805, lead CMPB3 advanced 1% to $2,056, tin CMSN3 rose 1.2% to $32,305 and nickel CMNI3 climbed 1% to $16,540 a ton.

Reporting by Pratima Desai; editing by David Evans

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