By Myra P. Saefong , MarketWatch
TOKYO (MarketWatch) -- Crude-oil futures inched closer to the $80-a-barrel level on Globex in late Monday morning trading in Asia, as news that China decided to loosen the yuan's de-facto peg against the U.S. dollar raised expectations for stronger Chinese economic demand.
Over the weekend, China's central bank announced plans to loosen the yuan's de-facto peg to the greenback. It also ruled out a one-time revaluation and said any strengthening of its currency would be gradual. See story on China's currency move.
The move will "make commodities less expensive for China, and so demand for oil should be stimulated," said Tony Nunan, an assistant general manager at Mitsubishi Corp. in Tokyo.
The decision "could reduce China's exports, but I think people feel China exports are strong anyway and the cost reduction effect on oil imports will be more important."
Crude for July delivery, the thinly traded front-month contract, was up 87 cents at $78.05 a barrel in electronic trading on Globex after trading as high as $78.27. August crude, the contract most actively traded, tacked on 76 cents to $79.02 a barrel. See Friday's Futures Movers column.
"The action by China could result in a higher yuan/lower dollar scenario that could spark renewed demand into China" for commodities such as crude oil, soybeans and copper, said Darin Newsom, a senior analyst at Telvent DTN.
Gold futures were trading higher on Globex, though they pared their gains by the late morning in Asia. See Metals Stocks column.
