May 1 (Bloomberg) -- Wheat fell to a five-month low as the dollar rallied against major currencies, eroding the appeal of U.S. commodities to overseas buyers.

The dollar reached a seven-week high against a weighted basket of the euro, yen, pound and three other currencies on speculation the Federal Reserve won't reduce borrowing costs further. The Reuters/Jefferies CRB Index, which includes wheat and 18 other raw materials, has slumped 4.6 percent in three days.

``Traders are thinking that maybe the Fed is done'' cutting interest rates, said Jason Britt, an analyst at Central States Commodities Inc. in Kansas City, Missouri. ``If they're done, then that's friendly toward the dollar.''

Wheat futures for July delivery dropped 11 cents, or 1.4 percent, to $7.90 a bushel on the Chicago Board of Trade. Earlier, the price touched $7.765, the lowest for a most-active contract since Nov. 20. The grain has tumbled 41 percent from a record $13.495 on Feb. 27.

Futures surged in January and February after adverse weather hurt global crops in 2007, and worldwide grain demand increased. Wheat fell 14 percent last month on signals that growers are increasing production to take advantage of the rally to the highest ever. Prices still have gained 62 percent in the past 12 months.

The Fed lowered its benchmark rate by a quarter point to 2 percent yesterday. The cut was the seventh since mid-September. Policy makers backed away from language signaling a preference for further cuts and described reductions to date as ``substantial.''

Supplies to Climb

Wheat growers will harvest 645 million metric tons in the year that starts July 1, up 6.8 percent from a year earlier, the International Grains Council said on April 24.

Producers in the U.S., the largest exporter of the grain, probably increased seeding in the year ending May 31 by 5.6 percent to 63.8 million acres, the Department of Agriculture said in a report last month.

``Supplies are still tight, but we're going to see that change,'' Britt said. ``Anytime we've got increasing supply in an environment where we have such high prices, that puts pressure on the market.''

From June 1 to April 24, advance sales of U.S. wheat have gained 41 percent from a year earlier, government data show.

Wheat was the fourth-biggest U.S. crop in 2007, valued at $13.7 billion, behind corn, soybeans and hay, government data show.

To contact the reporter on this story: Tony C. Dreibus in Chicago at tdreibus@bloomberg.net.

Last Updated: May 1, 2008 15:46 EDT