The Dollar Falls And Oil Prices Rise When The Fed Raises Interest Rates

The dollar fell as the U.S. Federal Reserve boosted interest rates by 25 basis points, pushing oil prices up in early Asian trade on Thursday.

Brent crude futures increased by 56 cents, or 0.7%, to $83.40 per barrel, while West Texas Intermediate (WTI) crude futures increased by 65 cents, or 0.8%, to $77.05 per barrel.

Wednesday, the Federal Reserve increased its target interest rate by a quarter of a percentage point and reaffirmed its commitment to "continuous rises" in borrowing rates as part of its ongoing fight against inflation.

The U.S. central bank acknowledged explicitly the progress done in reducing the rate of price increases from the 40-year highs reached last year.

A weakening dollar makes oil priced in U.S. dollars less expensive for holders of foreign currencies, hence increasing demand.

The U.S. dollar ended the session at 101.15, down 0.3% against a basket of currencies.

In light of the European Union's February 5 ban on Russian refined products, prices are also rising.

Diplomats said EU governments will seek a consensus on a European Commission proposal to establish price ceilings on Russian oil products on Friday, after postponing a decision on Wednesday due to disagreements among member states.

Last week, the European Commission suggested that, beginning February 5, the European Union impose a price restriction of $100 per barrel on premium Russian oil products such as diesel and a price cap of $45 per barrel on discounted items such as fuel oil.