A strong greenback makes dollar-priced crude more expensive to holders of other currencies, softening demand and leading to lower prices.
New York's main contract, West Texas Intermediate for November delivery, was down USD 1.21 at USD 84.71 a barrel in morning Asian trade, and Brent North Sea crude for November dropped USD 1.26 to 109.10.
The US Federal Reserve, after a two-day meeting Wednesday, unveiled a USD 400 billion stimulus plan reduce long-term interest rates but investors chose to focus on its warning about the outlook for the world's biggest economy and oil consumer.
In announcing the new measures, the Fed painted a grim picture of the economy, strapped with slow growth, high unemployment and a depressed housing market.
"There are significant downside risks to the economic outlook, including strains in global financial markets," the central bank's Federal Open Market Committee warned in a statement.
The Fed stimulus plan did little to buoy the markets, as US stocks dived and the dollar surged -- an indication investors were once again flocking to the currency considered a safe bet in times of crisis.
Chen Xin Yi, a commodities analyst at Barclays Capital in Singapore, said the Fed's statement about significant downside risks "contributed to some risk aversion" in the market.