Oct. 20 (Bloomberg) -- Platinum prices fell as the dollar rose, reducing investor demand for alternative assets. Palladium futures gained.

The greenback climbed as much as 0.6 percent against the euro, while the U.S. Dollar Index rose as much as 0.3 percent, rebounding from a 14-month low. Some investors buy precious metals to preserve value when the dollar weakens and sell them when the currency strengthens.

“Platinum and gold prices are taking a breather from their recent gains as the almighty dollar fights for its life and attempts to rally,” said Ralph Preston, a Heritage West Futures Inc. analyst in San Diego. “However, if the dollar fails to muster a lasting rally and falls back, look for metals to reassert themselves and continue climbing.”

Platinum futures for January delivery fell $7.90, or 0.6 percent, to $1,356.30 an ounce on the New York Mercantile Exchange. The most-active contract has climbed 44 percent this year, while the dollar is down 6.6 percent against the euro.

“It will be the dollar that will be the most closely watched,” Edward Meir, an MF Global Ltd. analyst in Darien, Connecticut, said today in a report. “The main driver fueling the run in commodities for much of the last week has been the weaker dollar.”

Palladium futures for December delivery gained $3.25, or 1 percent, to $337.65 an ounce in New York. The price has jumped 79 percent this year.

“Should the key $1.50 level break, expect to see a greater degree of reaction by the Europeans,” who are concerned that the euro’s rising value could slow economic recovery, Meir said. He said the dollar’s momentum will remain unchecked by central- bank intervention, “at least for a little while longer.”

The euro closed yesterday at $1.4965.

Platinum and palladium are mostly used in jewelry and pollution-control devices in cars.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net.

Last Updated: October 20, 2009 15:03 EDT