Oil prices climbed for a fourth day on Thursday on worries a storm may gather force to become the worst threat to U.S. offshore production since 2005, while the euro rose on tough inflation talk from the European Central Bank.
Asian stocks were little changed, but commodity-related shares received a boost from crude prices, which have recovered $7 since hitting a three-month low two weeks ago to trade above $118 a barrel.
The euro moved further away from Tuesday's six-month low versus the dollar as ECB officials overnight doused expectations that the next move in interest rates will be lower. Some officials even suggested increases might be needed, despite an economy that is shrinking and perhaps already in a recession.
"I'm not so surprised to hear some of these hawkish sounds coming from the ECB. They are facing after all inflation that is double their target," said Jan Lambregts, head of Asia research with Rabobank Global Financial Markets in Hong Kong.
"The big story continues to be about the euro zone and Japan and the disappointment in relative growth. People knew the situation in the U.S. wasn't great, but they are now having to face a deceleration in the euro zone a lot quicker than many had anticipated," he said.
The euro rose 0.5 percent against the U.S. dollar to $1.4786, and has recovered more than two cents from a six-month low of $1.4570 hit on Tuesday. It also gained 0.4 percent against the yen and sterling as dealers re-rated the expected differences in yield among the currencies.
The dollar was essentially unchanged against the yen at about 109.55 yen about 1 yen from a 7-month high around 110.66 yen set two weeks ago.
The October U.S. light crude future rose 48 cents to $118.63 a barrel climbing above a trendline that extended down from oil's all-time high of $147.27 a barrel hit on July 11.
Tropical Storm Gustav was downgraded from a hurricane this week but still poses a threat to 85 percent of U.S. offshore oil production in the Gulf of Mexico, underpinning oil prices.
If Gustav hits the Gulf as a Category 3 hurricane it would be the biggest storm to hit the region's infrastructure since 2005.
Shell Oil Co, which has the largest offshore operations, said it may begin shutting output as early as Thursday and expects to evacuate 1,300 workers by Saturday.