Coffee rose, erasing earlier losses, on speculation investors are boosting purchases as part of a broader commodity rally.

The UBS Bloomberg Constant Maturity Commodity Index reached a record on Thursday, led by energy. Investors are putting money into commodities because global demand for raw goods is rising and other securities are stumbling.

"Index funds were buying commodities on Thursday," said Rodrigo Costa, Vice President of institutional sales for Newedge USA LLC in New York. The return last year was decent and it attracts more money. Coffee is part of the basket."

Coffee futures for March delivery rose 0.15 cent, or 0.1%, to $1.356 a pound on ICE Futures US, formerly known as the New York Board of Trade. The price earlier fell as much as 1 percent.

Traders are "excited" because open interest, the total number of contracts that haven't been closed, liquidated, or delivered, is rising, Costa said. "New longs were placed in the market," Costa said. A long position is a bet prices will rise. The buying by index funds may have outweighed bearish speculation that the 2008 crop in Brazil, the world's biggest grower, may be larger than the government estimates.

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