Stronger dollar pulls oil prices back from their two-year high

London: Oil prices fell towards $86 a barrel yesterday, easing back from two-year highs reached earlier in the session, as a stronger dollar prompted profit-taking.

By 0928 GMT, US crude for December delivery shed 55 cents to $86.30 (Dh315.85) a barrel, having reached two-year highs of $87.49 a barrel. ICE Brent was 61 cents lower at $87.50 a barrel.

The stronger greenback — which typically trades in negative correlation with dollar-denominated commodities — also weighed on gold prices, pulling them lower from a fresh record of $1.398 an ounce earlier.

"It is a reasonable reaction given the US dollar continues to strengthen and it was very unlikely that [oil] could continue to decouple from the US dollar," Commerzbank oil analyst Carsten Fritsch said.

"If the dollar continues to regain strength, this should weigh on oil prices and could lead to some profit-taking," Fritsch said.

The dollar index, a measure of the greenback's performance against a basket of currencies, rose 0.7 per cent to 76.950.

Commodities rallied last week after the US Federal Reserve unveiled a second round of monetary stimulus, while oil climbed after a stronger-than-expected jobs report on Friday.