Rally in Australian and New Zealand currencies against the greenback By Laura Mandaro , MarketWatch PORT LOUIS, Mauritius (MarketWatch) -- The U.S. dollar tumbled against the Chinese yuan after Beijing's weekend decision to loosen its de facto peg against the greenback, a move that fostered fresh appetite for the Australian dollar and other currencies seen as most sensitive to global economic growth. One U.S. dollar was buying 6.7909 yuan in European trading Monday, or about 0.5% lower than its Friday level of 6.8275 yuan. On Saturday, China's central bank announced plans to "enhance ... flexibility" in the yuan's exchange rate, though it also ruled out a one-time revaluation and said any strengthening of its currency would be gradual. See full story on China's yuan move. In a statement Sunday, the People's Bank of China said the yuan's 0.5% trading band against the U.S. dollar will stay in place. The statements sparked a global rally Monday in stocks, commodities and currencies often lumped together as "risk assets" -- meaning they're expected to rise faster if economic growth picks up. The decision "paves the way for an end to the de facto USD-peg and a move lower in USD/CNY in the weeks and months ahead," wrote analysts at RBC Capital Markets in a note. They forecast the U.S. dollar could fall to 6.50 yuan by the end of the year. Read more forecasts on how fast yuan could rise. The move should also support China's contribution to global growth, a "positive for risk appetite," they wrote. The dollar index (DXY 85.60, -0.10, -0.12%) , which measures the greenback against a trade-weighted basket of six major currencies, slipped to 85.483, from 85.704 late Friday. Commodity currencies gain Meanwhile, the Australian dollar (CUR_AUDUSD 0.8834, +0.0020, +0.2269%) rallied, with one U.S. dollar buying A$1.307, or more than 1% less than Friday. The U.S. dollar also fell more than 1% against its New Zealand counterpart, buying 1.4002 New Zealand dollars (CUR_NZDUSD 0.7135, +0.0013, +0.1826%) . And the U.S. dollar fell about 0.5% against the Canadian dollar (CUR_USDCAD 1.0165, -0.0027, -0.2649%) . Analysts said the move by Beijing, which seemed targeted at soothing U.S. policy makers ahead of the Group of 20 meeting of leading industrialized countries next weekend in Toronto, should help global growth by increasing Chinese purchasing power and demand for imports, as well as boosting U.S. exports to China. And it should ease fears that Chinese authorities will raise exchange rates too dramatically to cool inflation, thereby avoiding a feared shock to global growth. Chinese Yuan Under Scrutiny The U.S. will closely monitor the Chinese yuan this week for signs that it is actually moving - after Beijing announced it would make its exchange rate more flexible. Video courtesy of Reuters. "By allowing a gradual appreciation of the yuan, China will be sharing more of its growth with the rest of the world," wrote Sherry Cooper, global economic strategist at BMO Financial Group, in emailed comments. "The bottom line is that this is good for the Canadian and U.S. economies, the Canadian dollar, commodity prices and the Canadian and U.S. stock markets," she said. The euro (CUR_EURUSD 1.2384, -0.0053, -0.4262%) also gained ground, buying $1.2403, up about 0.3% from $1.2365 in late North American trading Friday, on the heels of ending its strongest week against the dollar since September, notching a small decline as traders reassessed the need for the relative safe-haven status of U.S. unit. See Friday's Currencies report. Against the Japanese yen, the dollar (CUR_USDYEN 91.3500, +0.9900, +1.0956%) edged up to ¥91.32, from ¥90.76 late Friday.

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