Oil fell more than 2% today - the biggest drop in nearly two months - as the dollar rose after China's central bank boosted interest rates for the first time since 2007 to curb inflation in its booming economy.
The spectre of China's dynamic economic growth and thirst for oil being slowed sent oil and other commodity prices lower and caused investors to cut exposure to risk by selling the euro and commodity-sensitive Australian dollar and buying the US dollar.
US crude for November delivery fell $1.84 (2.2%), to $81.24 per barrel by 5.18pm (Irish time). It was on track to post the biggest percentage loss since late August.
Today’s slide was on track to wipe out all or most of the 2.25% price jump the previous session and comes a day before the expiration of the US November crude contract.
In London, Brent North Sea crude fell $1.63 (1.9%) to $82.74 a barrel.
Comments made by US Treasury Secretary Tim Geithner yesterday that the US would not engage in competitive currency devaluation also helped the dollar rise.
A stronger dollar can pressure oil prices by making greenback-denominated oil more expensive to users of other currencies and by pulling investment into foreign exchange markets from commodities that are viewed as riskier bets.
