Britain's FTSE edges up as housebuilders rise, miners lag

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* FTSE 100 up 0.1 pct

* Miners down on firmer dollar

By Kit Rees

LONDON, Aug 22 (Reuters) - British shares edged higher onMonday, led by a rise in housebuilding stocks, with gains cappedby a fall in the mining sector.

The blue chip FTSE 100 index advanced 0.1 percent to6865.87 points by 0906 GMT, having posted its steepest weeklyloss since mid-June on Friday.

The index lagged its European peers after a fall in themining sector, which extended losses to trade 2.9percent lower on the back of a resurgent dollar, which makesdollar-denominated commodities more expensive for holders offoreign currencies.

The dollar has gained on increased bets that U.S. FederalReserve could raise interest rates before the end of this year,following hawkish comments from Fed officials ahead of thisweek's global gathering of central bankers in Jackson Hole.

The strong dollar hit the price of gold in particular,pushing it down to two-week lows and weighing on shares ofprecious metals miners Fresnillo and Randgold Resources, which dropped 6.1 percent and 5 percent respectively.Likewise, mid-cap Hochschild fell 6.7 percent.

UK housebuilders Taylor Wimpey, Barratt Developments and Berkeley Group were the top gainers, upbetween 1.5 to 2.4 percent.

They fell heavily following the UK's vote to leave theEuropean Union in June. They have since risen off 2016 lows buthave yet to break above their pre-Brexit levels.

"On the one hand you've got the possibility of an economicdownturn, but equally you've got really low mortgage rates, andyou also have a very large imbalance in the supply and demand ofhousing ... and that's going to help support property prices,"Laith Khalaf, senior analyst at Hargreaves Lansdown, said. (Reporting by Kit Rees; editing by John Stonestreet)