Oil prices held steady after overnight record near $110 a barrel, supported by the further weakening of the U.S. dollar.

In Tokyo currency trading Wednesday, the greenback fell against the yen in Asia despite the U.S. Federal Reserve's plan to pump $200 billion into the financial markets to help ease the strain from the credit crisis.

Light, sweet crude for April delivery fell 28 cents to $108.64 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore.

On Tuesday, crude futures settled at a record finish of $108.75 a barrel, still up 85 cents on the day after falling back from an all-time trading high of $109.72 a barrel.

The dollar's weakness has fueled much of oil's recent run-up, as investment funds seek a hedge in hard assets. Speculation that rising prices for oil and other commodities will offset the falling dollar has been the main drivers of oil's rally from $87 a barrel in January.

Shum noted that the surge in investors' demand for commodities as a hedge against inflation has created a self-fulfilling cycle that causes prices to keep rising.

"As oil prices go higher and the inflation pressure continues to build, that further attracts investors to buy into oil and other commodities to get better returns," he said.

The energy watchdog agency for the world's most industrialized nations slightly cut its projection for world oil demand, which it now sees at 87.5 million barrels a day for this year, up 2 percent from 2007.

Separately, the U.S. Energy Information Administration said Tuesday it expects a slowing economy and record high oil prices to hold U.S. oil demand growth to just 40,000 barrels a day in 2008, bringing daily consumption to 20.74 million barrels.