Oil prices rally after China's yuan move
Oil prices rallied towards 80 dollars Monday on expectations that demand in China would rise after the nation's central bank said it would allow the yuan more freedom of movement.
Brent North Sea crude for August delivery rallied 1.20 dollars to 79.42 dollars a barrel in late London trading.
New York's main futures contract, light sweet crude for delivery in July, jumped 1.36 dollars to 78.54 dollars a barrel.
The news also helped push gold to a record high price of 1,265.30 dollars an ounce in London, with the precious metal also boosted by eurozone debt crisis concerns, traders said.
Over the weekend, the People's Bank of China said it would "strengthen the flexibility" of the country's currency, sparking a massive global stock market rally on Monday.
"With the yuan now pegged to a basket of currency, we once again see this as yet another measure which puts Chinese domestic demand on a longer-term sustainable path," said Barclays Capital analyst Amrita Sen.
China's yuan hit its strongest level in years Monday after authorities pledged limited currency reform, but analysts said Beijing's vow was unlikely to buy off critics of its exchange-rate controls.
China had pledged Saturday to allow more flexibility in what was widely seen as a bid to head off a spat with Washington at this weekend's G20 summit in Canada over charges that Beijing cheats on trade by skewing its forex rate.
The central bank on Monday held the central parity rate -- the centre point of the currency's official trading band -- at 6.8275 to the dollar, unchanged from Friday.
However, the yuan subsequently pierced the 6.8 barrier to hit 6.7969 to the dollar in China trading Monday, rising by 0.40 percent before closing slightly weaker than that, according to Dow Jones Newswires.
Victor Shum, a Singapore-based analyst with global energy consultancy Purvin and Gertz, said the oil market has also been closely monitoring the weather conditions in the Gulf of Mexico region amid the Atlantic hurricane season.
The Gulf of Mexico supplies about 30 percent of the energy needs of the United States, the world's biggest economy and any disruption to supplies caused by hurricanes tends to send prices surging.
© 2010 AFP