Oil fell on Friday as investors took profits after crude hit a record $111, but the dollar's weakness is likely to cap losses. US crude for April delivery fell 58 cents to $109.75 a barrel by 0724 GMT. The contract, which touched a record for the seventh time in a row in the previous session, was up nearly 8 percent this month and about 14.5 percent this year.
London Brent crude for April which expires later in the day, dropped 41 cents to $107.13. "It's a bit of profit taking, but it should be quite limited especially since we're coming to the weekend. The dollar still seems to be the main driving force of the day," said Gerard Rigby, an analyst at Sydney-based Fuel First Consulting.
Fears of a recession in the world's top consumer, the United States, have sunken the dollar, lifting the nominal prices of almost all commodities traded in the currency, despite the risk of a downturn in underlying consumption.
The dollar hit a record low against the euro and fell back towards a 12-year low versus the yen on Friday as rumours of more hedge fund failures stoked concern about damaged credit markets. "Depending on what happens for US economic news, crude may trade between $100 and $110 next week," said Rigby.
Market players will look towards US economic data due later on Friday, including February US inflation data and the Reuters/University of Michigan survey on consumer sentiment, for indications on the state of health of the world's top economy.
Inflation in consumer nations have been creeping up due to high energy costs, but the Organisation of Petroleum Exporting Countries again shrugged off calls for more oil to pull record prices back, giving support to crude prices. Qatar's oil minister said on Thursday that crude oil supplies were "very comfortable" and there is enough oil on the market for stocks to build.