LONDON, Jan 15 (Reuters) – Zinc hit another 10-year high on Monday as base metals rallied across the board on the back of a faltering dollar, with expectations that the European Central Bank may start trimming its stimulus programme lifting the euro to a three-year peak. The dollar’s consequent weakness made assets priced in the U.S. unit cheaper for holders of other currencies. “It is a dollar story … which is behind this move,” said ING analyst Warren Patterson. “If you look at the speculative position in the metals, there is potential for further upside, if we continue to get positive economic data and strong manufacturing data.” Fears over potential supply shortages and another drop in on-warrant inventories available to the market are helping to support the price of zinc, used primarily to galvanise steel. The market has been disappointed not to have seen more zinc production capacity coming back from Glencore, Patterson said, after the company curtailed 500,000 tonnes of capacity from late 2015. Glencore announced plans in December to restart its Lady Loretta mine in the first half of this year. “At least for the first half of this year, the zinc market is going to be fairly tight,” he said. * ZINC PRICES: Three-month zinc on the London Metal Exchange closed 1.2 percent up at $3,423 a tonne, having earlier touched a peak of $3,440, its highest since August 2007. * ZINC INVENTORIES: On-warrant zinc stocks in LME-registered warehouses fell by 10,000 tonnes to 116,675 tonnes, their lowest since early October, data showed on Monday, after fresh cancellations in New Orleans. Headline stocks are unchanged. * POSITIONING: Large holdings of LME zinc warrants have stoked concerns about availability, keeping the premium for cash over the three-month contract at $44.80 a tonne, the highest since mid-November.

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