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METALS-Copper hits highest since 2014 on inventories and soft dollar

* LME/ShFE arb: http://tmsnrt.rs/2oQ5nm20 (Recasts with Yellen news, comments, updates prices)

LONDON, Aug 25 (Reuters) - Copper futures hit their highest in 33 months on Friday, helped by falling inventories and a weaker dollar after the top U.S. central banker ignored monetary policy in a key speech.

Other metals declined, however, and analysts warned that copper prices were over-extended and due a correction.

Inventories in warehouses registered by the London and Shanghai exchanges showed further erosion, but that and other supply/demand fundamentals did not justify the 17 percent price surge over the past seven weeks, said Julius Baer commodities research analyst Carsten Menke in Zurich.

"I share the view that copper is over-extended and that a correction is due, but every correction needs a trigger," Menke said, adding that one trigger would be a rebound in the dollar.

The dollar fell, however, after Federal Reserve Chair Janet Yellen did not discuss the outlook for interest rates at a central bankers symposium in Jackson Hole, Wyoming, wrongfooting speculators who had expected her to make the case for further rate increases.

"The other trigger could be a confirmation of Chinese data showing that we are indeed heading for softer growth this year or early next year," Menke added.

* LME COPPER: Three-month LME copper was up 0.2 percent at $6,698 a tonne by 1425 GMT, having touched $6,747, its highest since November 2014.

* COPPER INVENTORIES: Weekly copper stocks in warehouses registered by the Shanghai Futures Exchange declined by 8.2 percent to 187,444 tonnes <CU-STX-SGH>, data showed on Friday.

On-warrant inventories - those not earmarked for removal - in London Metal Exchange (LME) depots have halved to 112,950 tonnes over the past six weeks <MCUSTX-TOTAL>.

* ALUMINIUM: LME benchmark aluminum fell by 0.6 percent to $2,094 a tonne after LME inventories continued to rise. On-warrant stocks have gained 101,725 tonnes, or 10 percent, in about two weeks. <MALSTX-TOTAL>

* ALUMINIUM BACKWARDATION: The LME "tom-next" spread for aluminum <CMALT-0>, which is the cost of borrowing metal for a day and often a flashpoint for positioning tension, flared to a $10 backwardation.

* OPTIONS: The recent rally in implied options volatility has made buying options expensive but provided an opportunity for relative-value plays, such as buying LME aluminum calls and selling SGX iron ore calls, Citi analyst Daoyuan Zhou said in a note.

* PHILIPPINES: LME nickel fell 1.7 percent to $11,550 despite news that lawmakers in the Philippines, the world's top nickel ore supplier, have filed a bill to ban mining in watershed areas and halt exports of unprocessed ores.

* PRICES: LME zinc dropped 1 percent to $3,089, lead was off 0.3 percent at $2,351 and tin shed 0.3 percent to $20,420.

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(Reporting by Eric Onstad; Editing by David Goodman)