US markets reacted strongly Thursday after China said it would ended the decade-old peg to the dollar and let the yuan fluctuate versus a basket of currencies.

In early New York trading, the yen and euro rose sharply against US currency. The dollar was buying 110.75 yen at 8:45 a.m., down from 112.91 late Wednesday, and the euro rose to 1.2193 dollars from 1.2138 late Wednesday.

The China shift "makes the yen more attractive to many people," said an analyst at Goldman Sach Group Inc. He expected the yen would advance to 105 per dollar within the next two months, and reach 100 within a year.

Meanwhile, US Treasury notes dropped as many expected that China would buy less of US Treasuries. "There could be upward pressure on Treasury yields," said a senior economist at New York- based Barclays Capital Inc.

China was the second-largest foreign holder of US Treasuries, with more than 243 billion dollars at the end of May.

Source: Xinhua