WASHINGTON (AFP) - US President Barack Obamas administration has said that China had not manipulated its currency to snare a competitive advantage but it remained undervalued, broaching a sensitive trade issue. In its first report to Congress on global currency policies since Obama took office nearly three months ago, the Treasury Department said that no major US trade partner had manipulated its exchange rate to gain an unfair competitive leverage. The report appeared to be an abrupt about-face for Treasury Secretary Timothy Geithner, whose comment that China manipulated its currency during his January Senate confirmation hearing set off alarms in Beijing. The twice-yearly Treasury report concluded that China, which US lawmakers for years have accused of artificially weakening the value of the yuan, or renminbi, to boost exports, had made progress in making its currency more flexible. China has taken steps to enhance exchange rate flexibility, Geithner said in a statement. Even so, Treasury remains of the view that the renminbi is undervalued. Geithner explained that the decision to not name China a currency manipulater came after Chinese officials reaffirmed in January 2009 their commitment to greater flexibility and the need to allow the exchange rate to adapt to an equilibrium level. He said the Chinese currency had appreciated by 16.6 percent in real effective terms between the end of June 2008 and the end of February 2009. Officials also determined that China was not manipulating its currency in weighing official data suggesting the pace of Chinas foreign-exchange reserve accumulation had slowed in the 2008 fourth quarter. Chinas massive 580-billion dollar fiscal stimulus package second in size to that of the United States unveiled in November to jump-start growth also was a factor, Geithner said. Under the former Republican administration of George W. Bush, the Treasury stopped short of designating China a currency manipulator despite furious complaints in Congress about the huge trade gap with China that dwarfs those with other partners. The politically sensitive trade deficit with China fell in February, amid the first global recession in six decades, to its lowest level in three years: 14.2 billion dollars, from 20.6 billion dollars in January. I have long maintained that Chinas exchange rate should better reflect market forces, for its own benefit and ours, said Democratic Senator Max Baucus, chairman of the Senate Finance Committee, in response to the report. I urge Secretary Geithner to work with Congress to chart a course for our economic ties with China months and years down the road, and set out clear milestones to measure our progress, he said. But the National Association of Manufacturers slammed the decision not to brand China a currency manipulator. While we recognize the delicacy of the global financial situation, todays decision was a missed opportunity to provide the basis for moving ahead to address Chinas currency within international institutions, said NAM president John Engler. A treasury official, speaking on condition of anonymity, said the White House had been consulted as the report was being finalized. We certainly have consulted with the White House, the official said. Asked what the Democratic administration considers an acceptable margin of fluctuation between the yuan and the dollar, he said: I dont have any range.