Nadal prevailed 7-6 (7-4), 7-6 (7-3) and retained his title at the invitational World Tennis Championships.
Federer had the top-ranked Nadal down 3-0 at the first tie-break; however Nadal was able to battle back with the help of some timely unforced errors on Federer's part, the BBC reported.
"I never lost my serve but I still lost the tournament, it's kind of tough," said Federer.
The match was the fourth time in the past five week that Federer and Nadal have squared off.
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