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 In Tokyo currency trading Wednesday, the greenback fell against the yen in Asia despite the U.S. Federal Reserve's plan to pump $200 billion into the financial markets to help ease the strain from the credit crisis.
The Fed, the European Central Bank and the Bank of England announced that they were joining with other central banks to provide more relief in the credit crisis. The relief plan is seen as likely to remove pressure on the Fed to cut interest rates before its next meeting.
"The end result of what the Fed did yesterday would be still to eventually increase liquidity, and that would still have the effect of weakening the U.S. dollar," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
"That's going to support crude oil pricing," he said.
Light, sweet crude for April delivery fell 28 cents to $108.64 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore.
On Tuesday, crude futures settled at a record finish of $108.75 a barrel, still up 85 cents on the day after falling back from an all-time trading high of $109.72 a barrel.
The dollar's weakness has fueled much of oil's recent run-up, as investment funds seek a hedge in hard assets. Speculation that rising prices for oil and other commodities will offset the falling dollar has been the main drivers of oil's rally from $87 a barrel in January.
Shum noted that the surge in investors' demand for commodities as a hedge against inflation has created a self-fulfilling cycle that causes prices to keep rising.
"As oil prices go higher and the inflation pressure continues to build, that further attracts investors to buy into oil and other commodities to get better returns," he said.
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 Oil's growing strength has also come amid warnings that there were no signs of relief from high oil prices on the immediate horizon.
Two prominent forecasters warned Tuesday that brisk demand in China and other emerging markets is likely to offset any downturn in demand in the U.S.
The Paris-based International Energy Agency on Tuesday said high crude prices continue to chip away at oil consumption in the U.S. and other industrialized nations, but warned of continuing strong demand in China and other emerging markets.
The energy watchdog agency for the world's most industrialized nations slightly cut its projection for world oil demand, which it now sees at 87.5 million barrels a day for this year, up 2 percent from 2007.
Separately, the U.S. Energy Information Administration said Tuesday it expects a slowing economy and record high oil prices to hold U.S. oil demand growth to just 40,000 barrels a day in 2008, bringing daily consumption to 20.74 million barrels.
Traders were also eyeing the release of data later Wednesday that is expected to show U.S. petroleum stockpiles grew last week, according to a Dow Jones Newswires survey of analysts.
The report is expected to show that U.S. crude oil stockpiles grew 1.6 million barrels, gasoline stockpiles grew 300,000 barrels, and stocks of distillates, which include diesel fuel and heating oil, fell 2 million barrels.
In other Nymex trading, heating oil futures lost 0.47 cent to $2.991 a gallon while gasoline prices lost 1.01 cents to $2.716 a gallon. Natural gas futures lost 2.3 cents to $9.977 per 1,000 cubic feet.
In London, Brent crude futures fell 24 cents to $105.01 a barrel on the ICE Futures exchange.
[Associated Press; By GILLIAN WONG]
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