By Maryelle Demongeot

SINGAPORE - Oil fell towards US$68 (S$98.92) a barrel on Monday, retreating further from a seven-month high above $70 hit on Friday as the US dollar continued to strengthen.

The dollar built on its largest one-day gain in more than five months, made on Friday after data showed the pace of US job losses slowed sharply in May, prompting fears of an earlier-than-expected rise in US interest rates.

A stronger dollar makes commodities such as oil, which is denominated in the currency, look more expensive to holders of other currencies.

US light crude for July delivery fell 38 cents a barrel to $68.06 by 0044 GMT, off an earlier intraday low of $67.78, having settled 37 cents lower on Friday at $68.44.

London Brent crude was down 34 cents to $68.00 a barrel.

"We could see more strength in the dollar this week and a short-term correction and consolidation in the commodities complex. It also looks like there is some technical resistance at $70," said Toby Hassall, head of research for Commodity Warrants Australia.

US futures rose to $70.32 a barrel on Friday, a seven-month high for the front-month contract, before erasing some of the gains after the US employment data was released. US employers cut 345,000 jobs in May, the fewest since September and far less than forecast, according to the Labor Department.

However, the overall employment rate still rose to the highest in almost 26 years at 9.4 percent, muddying the picture of economic recovery.

Asian stocks markets opened higher on Monday, helping to counterbalance the stronger US dollar, with Japan's Nikkei average hitting its highest point in eight months amid economic optimism, up 1.33 per cent by 0113 GMT.

Oil prices have doubled from the low $30s hit this winter, although many in the industry worry that the rise is not fed by fundamentals but by optimism only.

The increase has come despite rising crude stockpiles and amid few signs that the world economy will turn around dramatically any time soon, industry officials told a Reuters Global Energy Summit last week.

Speculators have trimmed the number of net long positions on crude on the New York Mercantile Exchange to 39,687 during the week to June 2, down from 40,122 in the week to May 26, according to date from the US Commodity Futures Trading Commission released last Friday. -Reuters