May 1 (Bloomberg) -- Commodities fell the most in six weeks as a rally in the dollar eroded demand for energy, metals, crops and livestock as alternative investments.

The weighted UBS Bloomberg Constant Maturity Commodity Index fell 2 percent to 1,471.098 at 4:29 p.m. in New York. A settlement at that level would mark the biggest drop since March 19. Every contract on the index declined except corn. Gold slid to a four-month low, crude oil fell as much as $3.16 a barrel, and rice plunged the most in more than four years.

The U.S. Dollar Index, a gauge of six currencies, jumped to a seven-week high on speculation the Federal Reserve will halt its interest-rate cuts. The central bank lowered the benchmark rate to 2 percent yesterday and backed away from signaling a preference for more after seven cuts since Sept. 18. The dollar is up 3.5 percent from a record low $1.6019 per euro on April 22, cutting demand for raw materials traded in New York.

``The dollar is the key factor for commodities today,'' said William O'Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey. Commodities' dollar-tracked movements this year have been ``extreme,'' he said.

The UBS Bloomberg index has dropped 6.5 percent from a record 1,573.84 on Feb. 29. Before today, the gauge climbed 18 percent this year, while the Standard & Poor's 500 Index fell 5.6 percent and the dollar slid 5.5 percent against the Dollar Index, which includes the euro, yen, pound.

Investors ``can no longer reliably depend on ever cheaper dollars to fuel speculative binges in commodities,'' Jon Nadler, a Kitco Minerals & Metals Inc. senior analyst in Montreal, said in a report today.

`Extreme Impact'

``The magnitude of the dollar's decline this year was severe, and has had an extreme impact on commodities,'' O'Neill of Logic Advisors said.

The UBS-Bloomberg index is up 15 percent in 2008, heading for a seventh straight annual gain. Crude oil, gold, copper and platinum have rallied to records this year, as did corn, wheat and soybeans. The cost of rice, a food staple for half the world's people, more than doubled in the past two years, sparking protests and riots in countries including Haiti, Indonesia, Mexico and Egypt.

Today, rough rice for July delivery fell $1.145, or 5.3 percent, to $20.635 per 100 pounds on the Chicago Board of Trade, the biggest drop for a most-active contract since Jan. 12, 2004. The decline was the sixth straight since rice reached $25.07 on April 24, the highest ever.

Gold, Oil Fall

Gold futures for June delivery fell $14.20, or 1.6 percent, to $850.90 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the price touched $848.50, the lowest for a most-active contract since Jan. 2. Gold often moves inversely to the dollar.

Crude-oil futures for June delivery dropped 94 cents, or 0.8 percent, to $112.52 a barrel on the Nymex. On April 28, the price surged to a record $119.93.

Copper futures for July delivery fell 21 cents, or 5.4 percent, to $3.6945 a pound on the Comex. That's the biggest drop by a most-active contract since Nov. 19.

Still, today's declines may be a ``buying opportunity'' for most commodities, as robust global growth continues to boost demand for raw materials, said Michael Pento, a senior market strategist at Delta Global Advisors in Huntington Beach, California. Delta Global manages $1.5 billion.

``I'm not at all daunted by this pullback,'' Pento said. ``This offers an excellent opportunity for investors who had missed out on the commodity bull-run earlier this year to get on board the train as these prices move higher after a short correction.''

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

Last Updated: May 1, 2008 16:34 EDT