(Mar 13): Slumping energy prices led commodities to a 12-year low as the dollar’s best rally since 2008 reduced the investment appeal of raw materials amid surpluses of everything from oil to sugar.

The Bloomberg Commodity Index fell 1.2 percent to 97.7682, the lowest level since August 2002, at 11:19 a.m. in New York, dragged down by crude oil, natural gas and raw sugar. The Bloomberg Dollar Spot Index, tracking the greenback against 10 currencies, is set to climb the most since 2008 this quarter and reached the highest level in data going back to the end of 2004. A stronger dollar tends to deter investment in raw materials.

Commodities are tumbling as economies expand in the U.S. and cool in other nations, driving the dollar higher. The Federal Reserve will hold a policy meeting next week as strength in the U.S. labor market fuels speculation that the central bank will lay the groundwork for higher borrowing costs. The European Central Bank started a bond-buying plan this week, adopting so- called quantitative easing to spur growth. Goldman Sachs Group Inc. said commodities may drop 20 percent over the next six months amid rising supplies.

“The combination of prospective Fed rate hikes versus QE in Europe and Japan suggests that dollar strength can continue,” Nic Brown, the London-based head of commodities research at Natixis, said by e-mail on March 10. “This stronger dollar inevitably implies downward pressure on the dollar- denominated price of commodities. Those used as a safe-haven store of value are most at risk.”

Crude slid as much as 4.1 percent to $45.13 a barrel in New York, headed for a fourth weekly drop. A glut of oil in storage in the U.S. expanded for a ninth straight week, the Energy Information Administration said March 11. Natural gas dropped for a second day in New York trading, losing as much as 2.2 percent to $2.674 per million British thermal units.

“Energy, be it crude oil or U.S. natural gas, see excess supply driven by the shale boom,” Harry Tchilinguirian, head of commodities markets strategy at BNP Paribas SA in London, said by e-mail.

The dollar index added 0.7 percent to 1,220.23 and climbed 7.9 percent so far this year. The U.S. unemployment rate fell to the lowest in almost seven years, data showed March 6, while Brazil’s economy will shrink 1 percent this year, Nomura said March 10, compared with its prior outlook for zero growth.

“In previous economic cycles, a strengthening U.S. economy would eventually lead to an improvement in the global economy,” said Brown at Natixis. “After a rapid expansion of the BRICs, that is no longer a certainty. The structural problems faced by Europe and Japan also suggest that a synchronous global economic recovery cannot be taken for granted.”

Raw sugar reached 12.75 cents a pound, the lowest price since April 2009, on ICE Futures U.S. in New York. The Brazilian real slid 18 percent against the dollar so far in 2015, data compiled by Bloomberg show, encouraging exports of the sweetener from the country, the world’s biggest producer. Brazil is also the leading grower of arabica coffee, which fell 1.2 percent to $1.306 a pound today and slid the most since 2010 on March 3.

“With sugar and coffee, which are very dependent on Brazil, the combination of favorable weather and the collapse of the real has opened the path for lower prices,” Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, said March 10 by e-mail.