TOKYO (Reuters) - Oil fell more than a dollar toward $68 a barrel on Monday as a rebound in the beaten-down U.S. dollar and nagging concerns that prices may have run ahead of market fundamentals extended last week's late sell-off.
The U.S. currency rallied sharply against a basket of currencies as investors covered short positions following last week's slide of 2 percent to its lowest in a year, fuelled by funds flowing into riskier assets such as stocks and commodities and a drop in U.S. Treasury yields.
The dollar's reversal on Monday sent U.S. crude for October delivery tumbling $1.22 to $68.07 a barrel by 0635 GMT, as broader commodity markets once again traded inversely to the greenback.
London Brent crude fell 95 cents to $66.74 a barrel.
"Oil fundamentals are unchanged, but the euro is down slightly and crude is down similarly," said Ken Hasegawa, a commodity derivatives sales manager at broker Newedge in Tokyo. "But as a trend, we may see dollar weakness for a while."
The dollar index, a gauge of the greenback's performance against six major currencies, rose 0.4 percent to 77.102, off its one-year low of 76.457 struck on Friday.
Oil fell nearly 4 percent toward $69 a barrel on Friday, paring most of its gains earlier in the week, as U.S. equities fell prey to profit-taking following five days of gains, raising concerns about the sustainability of its recent rally and the strength of an economic recovery in the U.S.
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