* Copper inventories at highest since mid-June last year
* COMEX investors bought dips, top side capped before FOMC
* Aluminium neared Fri's peak, highest since August 2008
* Upcoming: FOMC first ever presser post policy meet-Wed (Recasts, updates prices, market activity; new byline, changes dateline, previously LONDON)
By Carole Vaporean
NEW YORK, April 26 (Reuters) - Copper fell in London on Tuesday, catching up after a long holiday to steep losses in Asian and U.S. markets, but COMEX copper ended slightly higher as investors sought bargains at the lows.
Analysts expected any gains in copper to be limited ahead of the Federal Reserve's policy announcement and Fed Chairman Ben Bernanke's press conference due on Wednesday.
"We're bringing some bargain hunting in here. We had beaten up copper, probably excessively, yesterday. That is making prices attractive to buyers," said Sterling Smith, an analyst for Country Hedging Inc. in St. Paul, Minnesota.
On Wednesday, Fed officials continue their two-day policy meeting. The Fed seems certain to stick to its plan to complete a $600 billion bond-buying program in June, and is unlikely to raise interest rates given an uncertain U.S. economic outlook.
Investors in many markets have been on edge and on the sidelines ahead of Bernanke's press conference, which will be the first ever for a Fed chairman in the central bank's 97-year history.
"I think there's plenty of nervousness in the market and any upside activity is going to be tempered," Smith said. But he said Bernanke's remarks would probably be restrained.
"Mr Bernanke will probably not be saying anything too dramatic. For a first go, he simply wants it to happen without any errors, glitches or sudden surprises," said Smith.
Three-month copper on the London Metal Exchange ended at $9,545, from $9,700 a tonne when the market closed on Thursday before the long Easter weekend began last Friday.
The metal used in power and construction pared losses, however, from a session trough below $9,400 a tonne.
London prices were also weighed down by concerns that rising energy costs could hinder global growth prospects.
"It's clear that inflation that is coming alongside higher energy prices is not good for base metals. It's expected to accompany further tightening measures, particularly in the developing world, which will be damaging for demand," analyst Nic Brown of Natixis said.
In New York, COMEX prices edged higher after the sharp declines on Monday. COMEX benchmark May copper finished 1.60 cents higher at $4.3190 per lb. Many players have been rolling into the July contract, with expiration for May just a month away. July futures also settled 1.60 cents higher at $4.3395.
Boosting New York copper prices, the dollar declined to a 16-month low against the euro. Dollar-denominated assets like copper benefit in overseas markets from the dollar's depreciation. The dollar has dropped on the view that the Fed will be slower to raise interest rates than other major central banks.
On Wall Street, the S&P 500 stock index rallied to its highest level since June 2008 as a flood of positive corporate results added to economic growth optimism. This also supported industrial metals.
Metals market investors are not expected to make any aggressive moves before the long holiday weekend coming up for China's labor day on May 2. Some participants fear China's central bank may tighten monetary policy, noting that it has made policy adjustments on previous weekends.
Tighter policy in China, the world's top consumer, could damage copper's demand outlook.
INVENTORIES AND OTHER METALS
Copper stocks continued their counter-cyclical uptrend this quarter, pointing to still limp demand reinforced by trade data from China.
Copper inventories grew by almost 4,000 tonnes to more than 460,000 tonnes, the latest data showed, and were at their highest levels since mid-June last year.
Data also showed China's refined copper imports fell 43 percent in March from March 2010, due to high stocks and strong international prices.
Zinc ended at $2,260 from Thursday's $2,360 close. Technical selling was likely triggered after a breach of the 200-day moving average at $2,290, a key level eyed by funds.
Aluminium was $2,747 from $2,745 near last week's 2.5 year summit at $2,757 a tonne.
Tin ended at $32,700.
China raised the bar for polluters in a plan that included restricting new projects for mining tin, tungsten, molybdenum, antimony and rare earths.
Battery material lead ended at $2,558 from $2,601 and nickel was last seen at $26,650 from $26,900.
(Additional reporting by Sue Thomas and Melanie Burton in London; Editing by William Hardy and Jane Baird)