Oil jumps above $78 as China lifts currency peg

SINGAPORE — Oil prices jumped above $78 a barrel Monday in Asia as China's move to end its two-year peg to the dollar boosted investor confidence. Benchmark crude for July delivery was up $1.25 to $78.43 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract gained 39 cents to settle at $77.18 on Friday. China's exchange rate strengthened Monday while the central bank warned the value of the yuan would not dramatically rise due to the greater flexibility on its exchange rate. Traders anticipate a stronger yuan will make dollar-based commodities such as oil cheaper in China and bolster demand. The policy shift also suggests China's officials believe its economy is growing enough to absorb any slowdown in exports a stronger currency may cause. "The decision signals policymakers' confidence about China's economy and, to a lesser extent, the global recovery," Capital Economics said in a report. "This should be positive for commodities and equities both in China and the rest of the world." Oil has jumped from $64 a barrel on May 25 as fears have eased that Europe's debt crisis will brake global economic growth. In other Nymex trading, heating oil rose 3.32 cents to $2.1621 a gallon, gasoline gained 3.14 cents to $2.1790 a gallon and natural gas jumped 10.2 cents to $5.099 per 1,000 cubic feet. Brent crude was up $1.12 at $79.34 on the ICE futures exchange.