Coffee Falls as Stronger Dollar May Erode Appeal of Commodities

By Yi Tian

Aug. 15 (Bloomberg) -- Coffee futures fell for the third straight day on speculation the strengthening dollar will reduce the appeal of contracts traded in New York for buyers holding other currencies.

The U.S. Dollar Index, a gauge that includes the euro and yen among six currencies, rose for the 11th straight session, the longest advance since September 1975. The Reuters/Jefferies CRB Index of 19 raw materials fell as much as 0.9 percent. Coffee has dropped 2.2 percent this month, while the Dollar Index gained 5.1 percent during the same period.

There is ``an implicit negative relationship'' between the greenback and commodities, Dan Vaught, an analyst with Wachovia Securities LLC, wrote in a report today. It is ``no coincidence'' coffee fell as the dollar strengthened.

Coffee futures for December delivery fell 2.8 cents, or 2 percent, to $1.3625 a pound at 9:28 a.m. on ICE Futures U.S., the former New York Board of Trade. The most-active contract has gained 0.3 percent this week, after losing 3.1 percent last week.

Index funds have reduced stakes in coffee and other futures on the dollar's strength as well as efforts in the U.S. Congress to pass limits on speculation in crude-oil futures.

To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.