By Myra P. Saefong, MarketWatch
TOKYO (MarketWatch) -- Crude-oil futures fell in late Friday morning trading in Asia, as strength in the U.S. dollar fueled a broad retreat among commodities, pulling oil prices further away from the key $80 level.
Crude for March delivery was down 87 cents at $78.19 per barrel in electronic trading on Globex by the end of the morning trading session in Tokyo.
The contract, which hasn't traded above $80 since January, fell to an intraday low of $78.08 on Globex.
Analysts attributed the decline to the strength in the U.S. dollar in the wake of the U.S. Federal Reserve's surprise hike in its discount rate late Thursday after the close of U.S. markets. See Currencies.
"I do find that oil moves in the opposite direction to the value of the dollar," said Charles Perry, president of energy-consulting firm Perry Management.
"However, oil moves a lot for very little change in the dollar," he said, estimating that oil prices change about $1 when the dollar moves maybe only 1 cent.
"Change in the two are not proportional," Perry said.
The Fed said its 25-basis-point hike of the discount rate to 0.75% was to encourage banks to borrow more from the private market, and cautioned this was not a tightening of its monetary policy. See full story on Fed's discount rate hike.
Following the news, the Dollar Index (DXY 81.22, +0.82, +1.02%) , which measures the U.S. unit against a trade-weighted basket of six major currencies, was at 81.151, up from 80.38 ahead of the Fed move. See currencies story.
The Dollar Index is "exploding," and crude-oil prices shouldn't have rallied Thursday following another build in weekly stocks, said Darin Newsom, a senior analyst at Telvent DTN.
On Thursday in New York, crude-oil futures had gained 2.2% to finish above $79 a barrel, with news of a drop in U.S. distillate inventories helping offset rising crude supplies and a mixed batch of economic reports. See Thursday's Futures Movers story.
