LONDON, Sept 19 (Reuters) - Copper prices extended losses on Tuesday, as inventories piled up and as traders worried ahead of a U.S. Federal Reserve policy meeting that prolonged high interest rates could dampen metals demand.

Three-month copper on the London Metal Exchange was down 0.8% at $8,294 per metric ton by 1605 GMT, after a 0.6% decline in the previous session.

The U.S. Fed is not expected to raise rates on Wednesday, but financial markets are jittery about the prospect it could hold them at high levels to crush inflation.

"We're expecting higher rates for longer because the strength of economic data is largely supportive and while inflation is cooling, we're really not out of the woods yet, especially with energy prices re-igniting as well," said Nitesh Shah, commodity strategist at WisdomTree.

"There's nothing giving the metals market any major conviction in either direction. We have a little softening of prices today because of the China drag and uncertainty of how much longer the Fed will remain with a broadly hawkish outlook."

China has been rolling out modest stimulus measures, but economic growth is lacklustre and investors are concerned about the country's debt-laden property sector. U.S. business optimism about China has slid to a record low.

The most-traded October copper contract on the Shanghai Futures Exchange shed 0.8% to 68,790 yuan ($9,426.52) per ton, extending losses following a 0.4% drop on Monday.

Traders were keeping an eye on the depreciation pressure on China's yuan against the U.S. dollar, which could also affect Chinese demand for greenback-priced industrial metals.

The pressure is temporary, Chinese state media said on Tuesday. Year-to-date, the yuan has fallen more than 5% on the greenback.

Inventories in LME-regulated warehouses continue to build, highlighting rising supply amid weak demand.

LME copper stocks have soared by 175% since mid-July to 149,600 metric tons, the highest since May 2022.

LME aluminium dipped 0.4% to $2,211.50 per metric ton, zinc shed 2% to $2,491.50, lead eased 1.3% to $2,218.50, and tin slipped 0.3% to $26,110.

Nickel edged up 0.2% to $19,910 after earlier touching a 14-month low of $19,550.

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($1 = 7.2975 Chinese yuan) (Reporting by Eric Onstad Additional reporting by Enrico Dela Cruz in Manila, Editing by Louise Heavens and David Gregorio)