WASHINGTON - The US Treasury Department said in a report released on Friday that China was not manipulating its currency.

"In China, since the authorities decided in June 2010 to allow the exchange rate to appreciate in response to market forces, the renminbi (RMB) has appreciated by a total of 5.1 percent against the dollar in nominal terms through the end of April 2011, or at an annual pace of approximately 6.0 percent," noted the semi-annual report on international economic and exchange rate policies.

The Treasury said that as inflation in China is significantly higher than it is in the United States, the renminbi has appreciated more rapidly against the dollar on a real, inflation-adjusted basis, at a rate of around 9 percent per year.

The delayed report, which was originally scheduled to be sent to the Congress on April 15, finds "no major trading partner of the United States" manipulated its currency during the period covered in the report.

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The Treasury added that it will continue to "closely monitor" the renminbi appreciation pace.

The report also noted that the US economy is recovering from its deepest recession in the post-war period.

"While recent growth is encouraging, the economy still faces significant challenges," said the report. The number one challenge is still in the labor market.

The US unemployment rate, currently at 9.0 percent, is not expected to fall significantly this year.

Besides, housing market and long-term fiscal position are " unsustainable," according to the report.

In recent remarks, Treasury Secretary Timothy Geithner stated that China is the fastest growing market for US exports. In 2010, US exports to China grew at a pace that was 50 percent higher than the rest of the world.