* Dollar rebounds, U.S. jobless claims unexpectedly drop
* Dollar having abnormally large effect on copper
* Discrepancy between national and local policy in China (Recasts, adds comment and closing prices)
By Pratima Desai
LONDON, June 9 (Reuters) - Copper fell on Thursday to its lowest in nearly four months, hit by a stronger dollar after U.S. data revived expectations of an imminent Fed rate rise, while higher inventories reinforced negative sentiment.
Benchmark copper on the London Metal Exchange ended down 1.4 percent at $4,516 a tonne. The metal used in power and construction touched $4,483.50 after the New York opening on Thursday, its lowest since May 12.
The dollar was boosted by an unexpected drop in domestic jobless claims last week soothing some worries about U.S. economic growth decelerating in the second quarter.
A higher U.S. currency makes dollar-denominated commodities more expensive for non-U.S. firms, meaning they will buy less.
“The chief culprit is the dollar, under normal circumstances I would argue the dollar is not the chief driver,” said Barclays analyst Dane Davis.
“But this year the uncertainty about Fed rate hikes and the volatility of the dollar is having a abnormally large effect on the copper prices. We have a situation where every week a new data point recalibrates U.S. rate expectations.”
The volatility can be seen in copper’s rise on Monday to $4,748, its highest since May 12, a day after a monthly jobs report showed the Fed could delay rate rises.
Also weighing on copper this week is a 39 percent surge in LME inventories over the past week to above 213,000 tonnes.
“We expect LME stocks to trend higher on a reverse flow of stocks from China on domestic oversupply,” Societe Generale’s Robin Bhar said in a note.
Three-month aluminium ended down 1.7 percent to $1,577. The metal used in transport and packaging earlier hit $1,623, its highest since May 5.
News last month that China has agreed to eliminate export subsidies on some materials and metals raised expectations of a slowdown in the massive flow of semi-fabricated aluminium products into Western markets.
The impact is likely to be limited, however, with the agreement’s narrow scope meaning that Chinese smelters are unlikely to be deterred from raising output to capitalise on prices that, at Thursday’s highs, were up more than 10 percent since last November.
In other metals, zinc rose 0.4 percent to $2,069.5 a tonne after hitting a 10-month high of $2,105.50.
Lead dropped 1.9 percent to $1,702 a tonne, tin shed 0.4 percent to $17,025 and nickel lost 0.3 percent to $8,930 a tonne.
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Most active ShFE nickel
Three month LME tin
Most active ShFE tin
Additional reporting by Eric Onstad; Editing by David Goodman and Elaine Hardcastle