A resurgent dollar sent commodity markets reeling Thursday as investors interpreted latest U.S. economic data and monetary policy to mean interest rate cuts since September may be over.
"The dollar shot skyward as commodities in general really took it on the chin," said Mike Stevens, analyst for brokers SFS Futures in Mandeville, Louisiana.
Crude oil and gasoline fell as much as 3 percent each on the back of the dollar-related sell-off as investors unloaded commodities denominated in the currency.
Crude had hit record highs earlier this week, adjusting to the weak dollar and stronger rival currencies then.
Soybeans plunged 3 percent as well Thursday, and grains like wheat and rice were under pressure as the dollar hit a five-week high versus the euro.
In metals, gold sunk to a four-month low and copper plummeted 5 percent to a five-week low.
The Reuters-Jefferies CRB Index , which tracks 19 commodities futures, fell to a 3-1/2 week low.
Light crude on the New York Mercantile Exchange, or NYMEX, fell for the third day, settling 94 cents, or 0.8 percent, lower at $112.52 a barrel after hitting a session low of $110.30, its weakest since April 14.
"Demand destruction is definitely going on," said Nauman Barakat, senior vice president at Macquarie Futures USA, who comments on energy markets.
Analysts said the dollar got a boost from a U.S. Federal Reserve statement Wednesday which indicated that an eight-month long monetary easing cycle may be over.
The Fed statement came after another rate cut of 0.25 percentage point, which brought benchmark borrowing rates to 2 percent.
Michael Gross, futures analyst with Optionsellers.com in Tampa, Florida, said the Fed statement was "all the dollar really needs because it is so depressed right now to at least get a short-covering rally." U.S. personal spending data for March came in stronger than expected Thursday -- providing a bit of good news for an economy dependent on consumer spending -- although inflation pressures increased and manufacturing and jobless numbers were bearish.
In agricultural markets, U.S. soybean futures fell the most they could in a session in a dramatic reversal from Wednesday's rally driven by an export tax dispute in Argentina, the world's No.3 soybeans exporter.
Soybeans for July delivery on the Chicago Board of Trade fell the 70-cent limit to $12.44 a bushel, before settling at $12.71.
Gold futures for June delivery closed down $14.20 at $850.90 an ounce on the COMEX metals division of NYMEX.
It had fallen earlier to $848.50 -- its lowest level since Dec. 31.
COMEX copper for July settled down 21 cents at $3.6945 after falling to $3.6675 -- its lowest since March 25.
Copper for three-months delivery on the London Metal Exchange finished $320 or about 4 percent lower at $8,220 per tonne despite ongoing strikes at the world's biggest copper producer, Codelco