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Commodities fell Thursday, with oil, copper and corn ending down at least 2 per cent, as investors waited to see if the U.S. government will confirm job gains shown in a private report that boosted commodities the previous session.

A stronger dollar, and weak stock markets - pulled down by disappointing holiday sales for U.S. retailers - added pressure across commodities and equities markets.

The Reuters-Jefferies CRB index, a global commodities benchmark, settled down 1.25 per cent - three times more than what it gained Wednesday.

After a strong rally during thin holiday-season trading, commodities have had a volatile week.

The 19-commodity CRB index fell 1.6 per cent Tuesday, its biggest drop since November. Commodities rebounded Wednesday when a payroll processing company reported that U.S. private sector hirings in December were triple forecasts.

The U.S. Labor Department Friday will report December's non-farm payrolls, helping investors glean whether commodities have room for gains this year after a strong run in 2010.

The closely watched U.S. payrolls report has been largely dismal since the financial crisis began. But Wednesday's data from payrolls processor ADP raised hopes that the government report will beat forecasts.

Some economists doubted the validity of the ADP report. The Labor Department Thursday reported that Weekly jobless claims were higher than expected.

"Markets in our view are looking for a very strong confirmation of the labor market rebound," said Zach Pandl, economist at Nomura Securities International.

Crude oil fell $1.92 to settle at $88.38 per barrel in New York. Market bulls had been eyeing $100 per barrel after crude broke $90 resistance in December.

Oil first touched $100 in early 2008, then soared to a record of nearly $150 before the Lehman Brothers collapse triggered the global financial meltdown later that year.

Some say a stronger jobs market and economy is vital for oil prices to return to triple digits. But others argue that such a situation could also prompt the U.S. Federal Reserve to hike interest rates or pause its government debt buying program, known as quantitative easing.

Higher interest rates could raise borrowing costs and crimp demand for oil and other commodities.

This line of thinking was one reason copper ended down 7.85 cents in New York at $4.3295 a lb.

"The question is does the (Fed) start to move away from quantitative easing? If it does, that perhaps means less upside for commodities," said Daniel Brebner, analyst at Deutsche Bank.

Short-term U.S. interest rates are near zero.

Corn closed down 17-1/4 cents at $6.02 a bushel in Chicago , leading declines across grains markets, as the stronger dollar and economic uncertainty erased the previous session's gains. Investors were also growing concerned that the latest price surge may hurt demand may for U.S. grain.

The rise in agricultural markets, amid weather damage and strong fund buying, has fueled increases in food prices globally and sparked fears of inflation, prompting China to raise interest rates twice since October.

A surge in food prices triggered riots in a few countries like Haiti and Egypt in 2008, and on Wednesday hundreds of youths clashed with police in several Algerian cities over food price rises and chronic unemployment.

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