Brent falls below $57 on dollar rally

SINGAPORE (Reuters) - Brent (brent.167)crude fell below $57 a barrel on Friday as a strengthening dollar weighed on commodity markets after profit-taking by Asian investors earlier in the session.

Asian investors were also mulling the impact from a tentative deal that would end a strike by U.S. refinery workers.

Oil prices on Friday were initially supported by the U.S. dollar <.DXY>, which posted its biggest one-day fall in a month on Thursday, as it retreated from a 12-year high against a basket of major currencies on an unexpected fall in U.S. retail sales.

But the greenback rallied to send Brent falling below $57 a barrel towards the end of the Asian trading day.

A stronger greenback makes commodities denominated in the dollar more expensive for holders of other currencies and limits their purchases of commodities and other assets.

Brent for April delivery was trading down 25 cents at $56.83 by 0418 ET after ending the previous session down 46 cents. Brent had earlier hit a high of $57.40 in early Asian trade. The April contract expires on Monday.

U.S. crude futures rose 5 cents to $47.10 after settling down $1.12, or 2.3 percent, in the previous session. The April contract expires on March 20.

"Oil prices have dropped quite hard. Movements now are market driven - it's bargain hunting people are going in for," said Daniel Ang, an analyst at Singapore's Phillip Futures.

Brent's premium to U.S. crude had climbed to more than $10 mainly due to the strike, the largest walkout by U.S. refinery workers in 35 years, he said.

The deal would boost refining volumes and that could reduce U.S. crude stockpiles, which climbed last week to the highest level for this time of year in more than 80 years, Ang said.

"When the strike's over the premium (Brent over U.S. oil) will drop down to about $4," Ang said.

Brent is still slightly down from the start of this week and could test technical support at $55.92 per barrel.

"Oil has shifted into a lower zone," said Michael McCarthy, chief market strategist at Sydney's CMC Markets.

He said investors were waiting for some direction in the oil markets, with trading volumes down by a third in the Asia time zone as large investors sat on the sidelines.

Investors are also eyeing developments in Libya.

Islamist militants claimed responsibility for a bomb attack in the Libyan capital Tripoli even as production from the OPEC member's western oilfields saw a surprise comeback.

(Reporting by Keith Wallis; Editing by Richard Pullin, Tom Hogue and Biju Dwarakanath)