* Copper prices climb on brightening outlook for demand
* Copper initially down on stronger dollar (Updates prices)
By James Regan
SYDNEY, Dec 15 (Reuters) - London copper climbed on Thursday on a brightening outlook for demand, shaking off an earlier dip that was driven by a stronger dollar after the U.S. raised interest rates for the first time this year.
The U.S. Federal Reserve on Wednesday hiked rates by a quarter point and signalled a faster pace of increases in 2017.
“The signs of a stronger copper market heading into 2017 are there,” said Gavin Wendt at commodity advisory firm MineLife in Sydney.
“China’s economy is growing at a healthy pace and rising U.S. rate hikes point to a recovery in the U.S.”
The rate increase catapulted the dollar to a near-14-year peak against a basket of major currencies.
Three-month copper on the London Metal Exchange was 0.35 percent higher at $5,742 a tonne at 0712 GMT.
The most-traded copper contract on the Shanghai Futures Exchange was up 0.54 percent at 46,790 yuan ($6,747)a tonne.
Growing tightness in the base metal market continues to weigh on inventories held at exchanges, ANZ Bank commodities analyst Daniel Hynes said in a note.
“Another large drawdown in stocks in November has seen them hit levels not seen since just before the 2008 financial crisis,” he said.
Over the past six months, copper inventories have fallen 18 percent, while lead is down 10 percent and zinc and aluminium are down 7 percent
“With prices still below the incentive price to induce new supply, we expect inventories will continue to fall in 2017,” Hynes said.
LME zinc and nickel were trading mostly flat at $2,802 and $11,435 a tonne respectively.
ShFE zinc was up 2.3 percent, while Shanghai nickel edged 0.46 percent higher.
ShFE aluminium ended the session down 0.91 percent, after initially dropping more than 2 percent.
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Most active ShFE nickel
Three month LME tin
Most active ShFE tin ($1 = 6.9349 Chinese yuan) (Reporting by James Regan; Editing by Joseph Radford and Sunil Nair)