by Jacob Goldstein

Here's how it goes lately: The U.S. makes noise about China's currency being undervalued. China's currency appreciates — a little.

This long dance continues this week. The yuan, after remaining fixed against the dollar for much of the summer, has been rising in the past few days — as Congress holds hearings about the issue.

Tim Geithner is testifying today, and he'll say — unsurprisingly — that China needs to let the yuan appreciate more against the dollar. He'll also say, in vague terms, that the U.S. is trying to figure out what to do about it.

Here's an excerpt from his prepared testimony:

 

On June 19, 2010 China took a very important step when it announced that it would renew the reform of its exchange rate and allow the exchange rate to move higher in response to market forces.

In the roughly three months since that announcement, however, the Chinese have allowed their currency to appreciate against the dollar by only one percent, and the currency has actually depreciated against the weighted average of the currencies of its trading partners. ...

... we are examining the important question of what mix of tools, those available to the United States as well as multilateral approaches, might help encourage the Chinese authorities to move more quickly.

A spokesman for China's foreign ministry had this to say about the situation, the NYT reports.

I would point out that appreciation of the [yuan] will not solve the U.S. deficit and unemployment problems.

For more:

Listen to our podcast, "Did China's Central Bank Take Your Job?," which explains why the exchange rate matters.

Read our post from yesterday on Japan's China-esque currency intervention.

Read about the Treasury department's recent report that said China isn't manipulating its currency — a finding that has more to do with politics than economics.