London: Oil fell below $80 (Dh293.7) Thursday, dragged lower by a rise in the dollar as the euro slid on concerns over the outlook for the European economy, while a rise in US crude oil stocks also dampened sentiment.
The euro fell to a one-year low against the yen and was down versus the dollar on uncertainty over the ability of the Greek government to cope with its fiscal crisis, while the dollar's trade-weighted index rebounded.
A firmer dollar makes oil and other commodities more expensive for holders of other currencies, and also dragged gold down to near a two-week low.
US crude futures for April were down 45 cents at $79.55 a barrel by 1154 GMT, after rising $1 on Wednesday, lifted by comments from US Federal Reserve Chairman Ben Bernanke, who stressed his commitment to low interest rates.
London Brent crude lost 35 cents to $77.74 a barrel.
"The dollar had put pressure on commodities prices across the board," said Carsten Fritsch, analyst at Commerzbank. "It is encouraging profit-taking after recent price gains, which clearly don't seem to be justified by fundamentals."
Oil prices have risen by around $10 per barrel since hitting a low below $70 in the first week of February and are now close to the top of their trading range over the last year.
Edward Meir, analyst at brokers MF Global, said he saw the direction of the dollar as "the predominant guiding force" in the oil market.
"We suspect that the dollar still has more room to run on the upside ... and as a result, should keep the downward pressure on commodities for a little while longer," Meir said.
US data this week has dampened expectations of a quick rebound from the deep economic slowdown of the last two years.
Home sales drop
Sales of new US homes unexpectedly fell to a record low in January while demand for loans to buy homes hit a 13-year low last week, fanning fears of renewed weakness in the housing market and raising doubts over the pace of the economic recovery.
In Europe, Portugal's Socialist government, under investor pressure to cut spending and ensure it will not be the next weak link in the euro zone after Greece, has frozen civil service salaries this year as part of its plan to reduce its ballooning fiscal gap.
