METALS-Copper steady as Fed reassures markets on policy
* Anglo American posts 14 pct rise in Q2 copper output
* Dollar rises helped by solid U.S. data
(Recasts, updates with closing prices, adds comments, details)
LONDON, July 18 (Reuters) - Copper recovered from a one-week low on Thursday, helped by strong U.S. economic data and reassurances that loose U.S. monetary policy would be tapered off with care, but the metal was under pressure from a firmer dollar and oversupply worries.
Three-month copper on the London Metal Exchange fell to a session low of $6,850 a tonne, the weakest since July 10, before paring losses.
It was untraded at the close but was last bid at $6,900, slightly up from $6,890 at the close on Wednesday.
It dropped 1.5 percent in the previous session.
Testifying before Congress for a second day, U.S. Federal Reserve Chairman Ben Bernanke reiterated his recent assurances that the Fed will only start phasing out its huge monetary support programme once it is sure the U.S. economy is strong enough to stand on its own feet.
The ultra-loose monetary policy adopted by central banks around the world to boost growth in the last few years has helped prices of commodities as an alternative to interest-bearing investment assets.
"Until the Fed actually starts tapering, we won't see any huge declines ... but for copper, prices are already quite low so if anything we could see short-covering rallies in the near term," said Natalie Rampono, an analyst at ANZ in Melbourne.
Some support also came from strong economic data from the United States, which showed new claims for U.S. jobless benefits fell last week and factory activity picked up in the Mid-Atlantic region in early July, highlighting positive growth in the world's largest economy and a potentially better outlook for metals demand.
"Some of the shorts have seen some momentum in the better U.S. data. Some of the funds are heavily short on copper but also on aluminium, nickel and zinc so you are going to get some corrective push higher from time to time," Societe Generale analyst Robin Bhar said.
Weighing on copper though was a firmer dollar, which makes commodities priced in the U.S. currency more expensive for buyers outside the United States.
THE WEIGHT OF OVERSUPPLY
Also weighing on copper Anglo American posted a 14 percent rise in copper production in the second quarter, the latest in a series of reports by major mining companies of buoyant copper output.
BHP Billiton and Rio Tinto have also unveiled increases in copper output in recent days, affirming forecasts that the copper market would swing into surplus this year.
Mining groups had reported healthy copper output numbers earlier in the year, but some investors were uncertain about the trend continuing after production disruptions.
"We've needed evidence to show that this is not just a one-off, that the miners can sustain the improved production and these latest production results are exactly that," said analyst Gayle Berry at Barclays in London.
In other metals, three-month aluminium closed at $1,805 a tonne from $1,804 the previous session. LME inventories of the metal fell by 6,550 tonnes to 5.47 million tonnes, pulling away from recent record highs.
Galvanising material zinc closed at $1,856.50 from $1,854, lead at $2,036.50 from $2,030 and tin at $19,545 from $19,525.
Stainless steel material nickel closed at $14,000 from $13,970.
(Additional reporting by Melanie Burton; editing by Anthony Barker and Keiron Henderson)