Copper cuts losses on U.S. data; Fed in focus

* Copper inventories rise to 10-month high

* Durable goods helps complex pare losses

* Coming up: Fed statement 1630 GMT, briefing 1815 GMT

(Adds analyst comment, updates prices)

By Sue Thomas and Melanie Burton

LONDON, April 27 (Reuters) - Copper fell on Wednesday ahead of a U.S. Federal Reserve decision on monetary policy, although cheery U.S. manufacturing data helped the complex curtail earlier losses.

Benchmark copper on the London Metal Exchange traded at $9,374.25 at 1251 GMT against a close of $9,545 a tonne on Tuesday. It had earlier fallen as low as $9,347 a tonne.

New orders for long-lasting U.S. manufactured goods rose more than expected in March and bookings for the prior month were much stronger than initially thought, pointing to continued strength in the manufacturing sector.

"It certainly paints a picture that demand is continuing to grow," said analyst Gayle Berry of Barclays Capital.

"We're seeing that being reflected in some of the demand figures for the metals," she added.

She noted that latest data on aluminium producer shipments and inventories from the North American Aluminum Association showed that shipments of ingot and mill products have returned very close to pre-crisis levels.

More broadly, the market is waiting for the U.S. monetary policy meeting, and metals may prove range bound until then, she said.

The expectation that the Fed will stick to its ultra-loose monetary policy and point to low interest rates pushed the dollar to a 16-month low against the euro. A weaker dollar makes metals cheaper for holders of other currencies. Following a two-day policy meeting, Federal Reserve Chairman Ben Bernanke will likely hammer home the case for a patient approach to withdrawing the central bank's extensive support for the U.S. economy, the world's largest.

"The dollar is playing a role to help," said Commerzbank analyst Daniel Briesemann. "At the moment it's definitely the time to go on vacation, that's more or less why the markets are very calm and maybe a little bit depressed at the moment."

After the Easter long weekend which ended on Monday, Britain has another short week, with some markets closed on Friday for a royal wedding and on Monday for May Day.

CONSUMPTION WORRIES

Copper inventories rose 3,400 tonnes to 463,500 tonnes, the highest level since mid June last year. Stocks have climbed for 13 of the last 15 sessions, in a seasonally strong quarter for demand, creating worries over consumption for the metal used in power and construction.

"The very high inventory levels are definitely a concern, but I expect them to come down over the next few months. If this should happen, then the copper price may have room to further go up," Briesemann said.

Among the metals complex, aluminium fared best. The metal was $2,745 at from a close of $2,747.

Key Chinese industrial provinces have been hit by power shortages which have threatened to shut some small aluminium smelters, and larger ones face lower prices. Aluminium is one of the most energy-intensive metals to produce.

China, the world's biggest market and maker for aluminium and lead, normally hits peak electricity demand in the summer and can often face shortages, leading provincial officials to cut supplies to intensive energy users.

"Aluminium continues to look strong, supported by rising cost pressures, in energy in particular, across the globe and concerns over power availability in China," said Barclays Capital in a note.

Japanese shipments of aluminium products fell 8.5 percent in March from a year earlier, logging the first year-on-year decline in 16 months as last month's devastating earthquake took a toll on demand from industries across the board.

Zinc, used in galvanising, was $2,241 from $2,260 at the close on Tuesday.

"Zinc's relative underperformance is in keeping with its weaker fundamentals... with LME and SHFE stocks continuing to rise...the global market in surplus and output growing strongly," Barcap added.

LME stocks are up some 81,000 tonnes and 27,000 tonnes respectively in April so far.

Tin changed hands at $32,175 while battery material lead was $2,540 from $2,558. Three-month nickel was seen at $26,402 from $26,650.

(Source: http://www.futurespros.com/news/metals-news/metals-copper-falls-on-inventory-rise,-caution-on-fed-1000010565)