* Dollar strengthens after Bernanke testimony
* Escondida annual copper output soars 28 pct to 1.1 mln tonnes
* U.S. Senate to hold hearing on banks owning commodities storage
* Zinc falls after large rise in inventories
By Maytaal Angel and Eric Onstad
LONDON, June 17 Copper slipped to its lowest price in a week on Wednesday after the dollar strengthened on fresh comments about scaling back the U.S. stimulus programme and following news of an sharp increase in output at the world's biggest copper mine.
Base metals markets had been nervous ahead of the testimony of U.S. Federal Reserve Chairman Ben Bernanke, who affirmed the central bank would start later this year to prune its $85-billion-a-month bond-buying programme, which has been supporting financial markets.
But he also sounded a dovish tone, leaving open the option of changing that plan if the economic outlook shifted.
Three-month copper on the London Metal Exchange closed down 1.5 percent at $6,890 a tonne and touched a session low of $6,867.25, the weakest since July 10.
Copper climbed as high as $7,046 a tonne in the morning on short-covering, within reach of a near one-month high hit July 11.
Weighing on copper was a stronger dollar against a basket of currencies, which makes metal priced in the greenback more costly for European and other non-U.S. investors.
Copper prices have failed to find momentum above $7,000 a tonne, though they rose to those heights earlier this month after comments favouring looser U.S. monetary policy for longer triggered a cross-commodity rally.
Credit Suisse analyst Tom Kendall said the copper market was still short so there was potential for more bursts of short-covering in coming months.
"But once you get through the summer period, we are still bearish on copper and expect to see additional supply coming through at a faster pace than demand can absorb."
BHP Billiton, majority owner of Escondida in Chile, the world's single-largest copper mine, said copper output at the mine rose 28 percent to 1.1 million tonnes in the 2013 fiscal year.
The news added to expectations that the copper market will record a surplus in 2013 for the first time in three years.
The surplus could be moderated, however, since China's consumption of refined copper is likely to rise in the second half, buoyed by expected government backing for power sector investments to support economic growth.
China is the world's largest copper consumer, accounting for about 40 percent of demand. Its economic growth slowed to 7.5 percent in the second quarter, from 7.7 percent in the first quarter, leaving a big dent in copper prices, which are down nearly 13 percent this year.
Elsewhere, the U.S. Senate committee will hold a hearing on whether banks should control physical commodities storage, a practice that detractors argue has resulted in long queues to get metals out of LME warehouses.
The queues have prompted rising spot premiums on physical markets, and have also spurred producers to crank up output in spite of falling demand, weighing on LME benchmark prices.
In other metals, zinc closed down 1.8 percent at $1,854 a tonne after daily LME stocks data showed a sharp 75,900 tonne increase in inventories to 1.077 million tonnes, near their highest level in over a month.
Lead finished down 2.2 percent at $2,030 a tonne and aluminium edged down 0.6 percent to $1,804 a tonne but other metals bucked the weaker trend.
Nickel ended 1.45 percent stronger at $13,970 a tonne and tin rose 0.4 percent to $19,525.