Oil hovers below 79 after 3-day slide

Crude jumped to a 12-month high at USD 82 a barrel last week as the dollar weakened amid concerns that massive global stimulus spending will eventually spark inflation.

Since oil is priced in dollars,a drop in the US currency makes it cheaper to international investors.

The euro touched a 14-month high of USD 1.5061 yesterday before closing at USD 1.4861. The euro strengthened slightly to USD 1.4882 in early Asian trading while the dollar fell to 92.06 yen from 92.21.

8220;A weakening dollar could put significant pressure on dollar-denominated oil prices in the months ahead,8221; Bank of America Merrill Lynch said in a report.

8220;The combination of surging money supply,a rapidly weakening dollar and a cyclical improvement in oil demand could push oil prices above USD 100.8221;

Some economists,such as Jorg Zeuner of Liechtenstein-based VP Bank,expect the dollar and oil to stabilise over the next three to six months as inflation fears ease.