Oil prices plunge as Fed warning prompts dollar rally

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Oil prices plunged more than four dollars on Thursday, hit by a stronger dollar as investors flocked to the safe-haven currency after the US central bank warned of significant downside risks to the economy.

A strong greenback makes dollar-priced crude more expensive to holders of other currencies, softening demand.

New York's main contract, West Texas Intermediate for delivery in November dived $4.30 to $81.62 a barrel.

Brent North Sea crude for November tumbled $4.13 to 106.23 in London afternoon trade.

The US Federal Reserve on Wednesday unveiled a $400-billion stimulus plan to reduce long-term interest rates but investors chose to focus on its warning about the outlook for the world's biggest economy and oil consumer.

The Fed painted a grim picture of the economy, strapped with slow growth, high unemployment and a depressed housing market.

"There are significant downside risks to the economic outlook, including strains in global financial markets," the central bank's Federal Open Market Committee warned.

Analysts at Phillip Futures said "after the Feds announcement, the rise in the dollar prompted investors to sell risk assets such as crude oil and stocks."


© 2011 AFP

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