UPDATE 11-Oil rises as China yuan move may boost demand

                                
 * China yuan flexibility, rise vs dollar, may lift demand
                                
 * Euro slips, Wall St. pares gain, curbs oil's rise
                                
 * Coming up: Federal Reserve 2-day meeting starts Tuesday
 (Recasts, updates market activity, adds settlement prices)
                                
 By Robert Gibbons
                                
 NEW YORK, June 21 (Reuters) - Crude oil prices rose on
Monday after China's move to make its currency more flexible
raised expectations for boosted oil demand.
                                
 But U.S. crude futures ended well below an early 6-1/2 week
high when technical resistance firmed near $79 a barrel.
                                
 A pullback by the euro and a slide by natural gas futures
also helped curb oil's early rise, sources said.
                                
 U.S. July crude <CLc1> rose 64 cents, or 0.83 percent, to
settle at $77.82 a barrel, after rising to $78.92, highest
intraday price since $80.39 was struck on May 6.
                                
 The July contract expires on Tuesday and its deficit to the
August contract <CL-1=R> narrowed on Monday, to 79 cents from
$1.08 on Friday.
                                
 August ICE Brent <LCOc1> rose 60 cents to settle at $78.82
a barrel, after reaching an early $79.86 peak.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
                                
Take a Look - China vows yuan flexibility  [ID:nCHINATAKE]
                                
Factbox on key China commodity imports     [ID:nSGE65J03E]
                                
John Kemp column on yuan pledge:           [ID:nLDE65K0LW]
                                
Graphic on China's commidty spending:
                                
  http://link.reuters.com/zeh33m
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
 "Crude stopped right at the July contract's 50-day moving
average, $78.91, and there was a sense of why not book some
profit and wait for the results of the Fed's two-day meeting,"
said Richard Ilczyszyn, senior market strategist at
Lind-Waldock in Chicago.
                                
 The U.S. Federal Reserve Federal Open Market Committee
two-day meeting starts on Tuesday. Markets will be looking for
indications that low interest rates and other economic stimulus
measures will remain in place.
                                
 U.S. July natural gas futures <NGN0> fell 12.4 cents, or
2.48 percent, to settle at $4.873 per million British thermal
units, after being up more than 3 percent early.
                                
 "Crude prices (fell) here briefly with the fall in natgas
prices being part of the reason," said Phil Flynn, analyst at
PFGBest Research in Chicago.
                                
 Sources said weather models showing milder temperature
forecasts in the medium term prompted natural gas traders to
book profits after natural gas' recent rise.
                                
 China's yuan on Monday posted its biggest daily surge since
its July 2005 landmark revaluation, sending a signal ahead of
this weekend's G20 summit that Beijing is keeping its word and
allowing greater currency flexibility. [ID:nN20208975]
                                
 The yuan closed at 6.7976 versus the dollar, up 0.42
percent from Friday's close of 6.8262. The 6.7958 intraday peak
was an all-time high since the revaluation. [ID:nTOE65K07H]
                                
 The euro fell to session lows against the dollar on Monday
as stop loss orders were triggered once the euro dropped below
$1.2350, traders said. [USD/]
                                
 Analysts said a stronger yuan against the U.S. dollar might
make Chinese imports of dollar-denominated oil less expensive,
boosting demand.
                                
 But the longer-term impact on oil and other commodity
prices may be small, according to some analysts, since China
will not let the yuan rise sufficiently high to make much
difference to its companies' spending power on commodity
imports. [ID:nLDE65K0LW]
                                
 Copper also pared its gains after it was up strongly in
response to the news about the yuan. [MET/L]
                                
 Reuters' analysis of official Chinese figures on Monday
showed China's oil demand fell in May from April, though it
remained up 9.4 percent from year ago. [ID:nTOE65K07Q]
                                
 U.S. crude prices have recovered about 21 percent from the
May 20 $64.24 intraday low, but remain more than $9 below the
2010 peak of $87.15 struck on May 3.
                                
 The technical picture had taken on a renewed bullish tone
early on Monday, as U.S. crude stretched its gain after opening
above the 50-day moving average for front-month crude and found
resistance at the 100-day moving average.
                                
 U.S. stocks ended lower after initially rallying on the
China currency news. [.N] European stock markets <.FTEU3> rose,
mirroring Asian equity gains after China's currency move
boosted confidence in the global economy. [MKTS/GLOB]
                                
 The dispute over Iran's nuclear program was seen as
supportive to oil prices. Iran barred two U.N. nuclear
inspectors, adding to tension after Tehran was recently hit by
new sanctions over its nuclear program. [ID:nLDE65K2AA]
 (Additional reporting by Gene Ramos in New York, Joe Brock and
David Turner in London and Alejandro Barbajosa in Singapore;
Editing by Lisa Shumaker)