METALS-Copper rises after 2-day fall, weaker dollar helps
* Markets await Bernanke testimony Wednesday, Thursday
* China demand "remains challenging" -Commerzbank
LONDON, July 16 (Reuters) - Copper rose on Tuesday, helped by a weaker dollar, as investors waited for further signals on when the U.S. Federal Reserve might begin to rein in its monthly bond-buying programme.
The dollar eased against a basket of currencies but its losses were limited, supported by the view that the Federal Reserve is likely to be the first among major central banks to move away from ultra-loose monetary policy.
A weaker U.S. currency makes prices of dollar-priced goods, such as metals, cheaper for holders of other units.
Markets are waiting for Fed Chairman Ben Bernanke to testify to Congress this week for more information on when the U.S. plans to scale back its huge bond-buying programme, which has supported demand for commodities.
Benchmark copper on the London Metal Exchange ended up 1.13 percent at $6,998 a tonne, after falling half a percent in the previous session.
Copper prices hit a nearly 1-month high at $7,049.25 a tonne on July 11, but have failed to gain traction above $7,000 and are down about 12 percent this year.
"The overly pessimistic market in the past few weeks and months is making copper vulnerable to a short-term recovery," said Eugen Weinberg, head of commodity research at Commerzbank.
"Much of the growth fears are already priced in. So I don't see much potential to the downside. But any price increase is going to be gradual. The Chinese demand situation remains very challenging."
China's economic growth slowed to 7.5 percent in the second quarter, from 7.7 percent in the first quarter, the ninth quarter in the last 10 that expansion has weakened.
Chinese Premier Li Keqiang said earlier the government should not rush into changing policy as long as economic growth stays within the official comfort zone, although it needs to be vigilant about a sharper slowdown.
China is the world's largest buyer of copper and it makes up about 40 percent of global consumption.
In other economic data, U.S. homebuilder confidence rose in July to its strongest level in 7-1/2 years amid tightening supply and solid demand, while U.S industrial production rose slightly more than expected in June.
Underlining a softening outlook for metals demand, the Asian Development Bank (ADB) on Tuesday lowered its growth forecasts for developing Asia this year and next as a softer outlook for China meant subdued economic activity elsewhere in the region.
Also, European car sales slumped to their lowest six-months total in 20 years in the first half of 2013, with a 6.3 percent drop in June suggesting no let up for an industry battered by overcapacity and weak demand.
On the plus side for copper demand, a crackdown in China aimed at curbing distorted credit growth has triggered growing appetite for the use of commodities as collateral to raise cash, inflating copper imports.
In other metals, three-month nickel ended up 1.96 percent to $13,770 a tonne.
The global nickel market was in surplus by 12,000 tonnes in May, up from 8,700 in April, a monthly bulletin from the Lisbon-based International Nickel Study Group showed on Monday.
Aluminium ended up 0.61 percent at $1,815 a tonne, lead closed up 0.97 percent at $2,075 a tonne, zinc finished down 0.21 percent at $1,888 a tonne, while tin ended up 0.34 percent at $19,455 a tonne.