June 3 (Bloomberg) -- Commodities fell the most in six weeks, led by energy and grains, as a rebound by the dollar sapped demand for raw materials as a hedge against inflation.

The Reuters/Jefferies CRB Index dropped 2.8 percent to 253.05, the biggest decline since April 20 for the gauge of energy, metals and crops. The dollar headed for the largest increase in four month against a basket of six major currencies, eroding the appeal of goods priced in the greenback.

Natural gas plunged 8.6 percent on forecasts for rising inventories, and crude oil declined 3.5 percent as U.S. supplies unexpectedly rose last week. In May, the CRB jumped 14 percent, the most in 34 years, on speculation that demand will rebound as the global recession eases. Last month, the dollar plunged 6.2 percent against the currency basket, the most since March 1985.

“Today’s reversal in the dollar is certainly bearish for commodities in the short term,” said Paul Baiocchi, who helps manage more than $1 billion as a senior market strategist at Delta Global Advisors in Huntington Beach, California. Still, in the long run, “we will see higher prices for gold, energy and base metals,” he said.

Wheat prices in Chicago tumbled 7.8 percent today, and corn slumped 3.8 percent. Only cocoa, aluminum and cattle posted gains among CRB components. The index still has climbed 10 percent this year. The gauge reached a record 473.97 on July 3.

Feeble Recovery

The dollar rose today for the first time in five sessions on speculation that an economic recovery will be too weak to sustain gains in higher-yielding assets such equities and raw materials.

“The dollar is up, so we can expect commodities to be down,” said Jeff McReynolds, the owner of McReynolds Marketing & Investments in Hays, Kansas. “This kind of run-up in the dollar doesn’t help our competitiveness” with exporting countries, he said.

Commodities plunged by a record 36 percent in 2008 as the global recession slashed consumption.

Today, crude-oil futures for July delivery fell $2.43 to $66.12 a barrel on the New York Mercantile Exchange. The price still has gained 48 percent this year.

Natural-gas futures for July delivery dropped 35.4 cents to $3.766 per million British thermal units. The price has tumbled 33 percent this year.

Wheat futures for July delivery plunged 52 cents to $6.175 a bushel on the Chicago Board of Trade, the sharpest fall for a most-active contract since Jan. 12.

Corn futures for July delivery declined 17 cents to $4.325 a bushel, the steepest drop since Feb. 17.

To contact the reporters on this story: Millie Munshi in New York at mmunshi@bloomberg.net;

Last Updated: June 3, 2009 16:15 EDT