SINGAPORE: Oil prices jumped above $78 a barrel Monday in Asia as China’s move to end its two-year peg to the dollar over the weekend boosted investor confidence.

Benchmark crude for July delivery was up $1.09 to $78.27 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract gained 39 cents to settle at $77.18 on Friday.

The official exchange rate for China’s currency stood unchanged Monday in line with the central bank’s warning the value of the yuan would not dramatically rise.

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 3.02 cents to $2.1591 a gallon, gasoline gained 3.24 cents to $2.180 a gallon and natural gas jumped 7.2 cents to $5.069 per 1,000 cubic feet.

Brent crude was up $1.18 at $79.40 on the ICE futures exchange.