SINGAPORE — Oil prices fell below $78 a barrel Friday in Asia after the U.S. Federal Reserve's unexpected hike to interest rates for emergency loans to banks boosted the dollar, making commodities less attractive to investors.
Benchmark crude for March delivery was down $1.28 to $77.78 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract added $1.73 to settle at $79.06 on Thursday.
The Federal Reserve said late Thursday it will bump up the so-called "discount" lending rate by one-quarter point to 0.75 percent effective Friday. The surprise move, which doesn't affect consumer lending rates, helped weaken the euro to $1.3466 on Friday from $1.3529 the previous day.
A stronger dollar makes commodities priced in the U.S. currency more expensive for investors with non-dollar funds. A weakening dollar helped fuel the run-up of the oil price to $147 a barrel in July 2008.
Crude has traded between $69 a barrel and $84 for most of the last six months.
"If the dollar keeps rallying, crude could drop below $70," said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore.
In other Nymex trading in March contracts, heating oil fell 2.75 cents to $2.024 a gallon, and gasoline dropped 3.19 cents to $2.037 a gallon. Natural gas eased 1 cent to $5.16 per 1,000 cubic feet.
