Crude oil rose in New York on speculation U.S. interest rate cuts will drive the dollar down further, prompting investors to buy commodities.

Oil retraced some of yesterday's more than $4-a-barrel drop as the dollar fell for a fifth day against the euro and yen. Traders increased bets that the Federal Reserve will cut its benchmark interest rate by as much as 1 percent today.

``It's now all Fed watch so that will have an effect on the dollar which will have an effect on the oil price,'' said Rowan Menzies, head of research at Commodity Warrants Australia Ltd. in Sydney. ``That will add to the gyrations in the market.''

Crude oil for April delivery rose as much as $1.14, or 1.1 percent, to $106.82 a barrel in after-hours trading on the New York Mercantile Exchange. It was at $106.21 at 1:07 p.m. Singapore time. Futures fell $4.53, or 4.1 percent, to $105.68 a barrel yesterday, the biggest one-day drop since August 6, 2007.

Oil touched $111.80 a barrel yesterday, the highest since trading began in 1983. It rose as much as $1.59 and dropped as much as $6.98 during the session.

Oil declined after U.S. financial markets plunged following the Fed's emergency decision to cut the discount rate and JPMorgan Chase & Co. saved Bear Stearns from bankruptcy by buying the company for $2 a share.

Brent crude for May settlement rose as much as 61 cents, or 0.6 percent, to $102.36 a barrel on London's ICE Futures Europe exchange. It was at $102.40 at 12:33 p.m. Singapore time.

Yesterday, the contract declined $5.80, or 5.4 percent, to $101.75 a barrel. Futures also reached a record $107.97.

Dollar Falls

The dollar dropped to a record low against the euro and Swiss franc yesterday after the Fed made an emergency cut in its discount interest rate, or the level the Fed makes loans to banks, on March 16, its first weekend change in borrowing costs since 1979. The U.S. currency fell below 96 yen for the first time in more than 12 years.

The falling dollar have spurred fund managers to invest in commodities, which have risen in value to offset the declines in their dollar denominated prices.

The dollar dropped to 96.99 yen at 12:24 p.m. in Tokyo from 97.33 late yesterday, when it touched 95.76 yen, the weakest since Aug. 15, 1995. The dollar traded at $1.5773 per euro, after reaching $1.5903 yesterday, the lowest level since the euro started trading in 1999.

Traders saw a 78 percent likelihood the Fed will cut its target rate for loans between banks by 1 point at today's meeting, according to futures on the Chicago Board of Trade. There is a 22 percent chance the cut will be 1.25 points, futures show.

Commodities Drop

Crude oil, copper and coffee yesterday led a decline in commodities on concerns that the financial turmoil may have triggered a U.S. recession that would have stalled demand for raw materials.

The UBS Bloomberg Constant Maturity Commodity Index fell 4.5 percent yesterday to 1,458.597, the biggest drop since Oct. 3, 1997, when the data starts. Copper plunged the most in eight weeks and coffee dropped 11 percent.

The Reuters/Jefferies CRB Index plunged 4.6 percent, the most since at least 1956.

``It was just a wholesale liquidation,'' said Commodity Warrants Menzies. ``Those markets are very liquid so when people run for the exits it really hammers them.''

Gold pared gains from a rally to a record $1,033.90 an ounce as investors sold the precious metal and commodities to cover losses in other markets.

Gasoline Plummets

Gasoline for April delivery yesterday fell 18.52 cents, or 6.9 percent, to $2.5042 a gallon in New York, the lowest close since Feb. 28. It was at $2.52 at 12:07 p.m. Singapore time. Futures touched $2.7435 on March 11, an intraday record for gasoline to be blended with ethanol, known as RBOB, which began trading in October 2005.

U.S. crude-oil inventories in the week ended March 14 probably rose 2.3 million barrels, according to the median of responses in a Bloomberg News survey. It would be the ninth increase in 10 weeks.

Gasoline inventories probably fell 800,000 barrels from 236 million barrels the week before, according to the median of responses.