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

Oil retraced some of yesterday's 4.1 percent drop as the dollar fell for the 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 percentage point today.

``The Fed is eager to save the economy at any price, even inflationary pressure, and that is favorable for commodities,'' said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt. ``If we have a cut of 1 point you'll see another spike in commodities.''

Crude oil for April delivery rose as much as $1.71, or 1.6 percent, to $107.39 a barrel in electronic trading on the New York Mercantile Exchange. It traded at $107.25 at 10:28 a.m. London time.

Futures fell $4.53, or 4.1 percent, to $105.68 a barrel yesterday, the biggest one-day drop since Aug. 6.

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 the Fed's emergency decision to cut the discount rate and JPMorgan Chase & Co. saved Bear Stearns Cos. from bankruptcy by buying the company for $2 a share.

Brent crude for May settlement rose as much as $1.82, or 1.8 percent, to $103.57 a barrel on London's ICE Futures Europe exchange. It was at $103.40 at 10:29 a.m. London time.

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

Dollar Falls

``Bear Stearns makes the U.S. financial system look very shaky, that's why oil fell,'' said Dalton Garis, economics professor at the Abu Dhabi Petroleum Institute.

The falling dollar has spurred fund managers to invest in commodities, which have risen in value to offset declines in non-dollar currencies.

``There is a lot of inflation hedging going on with people selling the dollar and buying crude,'' said Jonathan Kornafel, director for Asia at Hudson Capital Energy in Singapore.

The dollar dropped to 97.58 yen today and yesterday touched 95.76 yen, the weakest since Aug. 15, 1995. The dollar traded at $1.5755 per euro, after reaching $1.5903 yesterday, the lowest level since the euro started trading in 1999.

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