UPDATE 1-Obama says China's yuan move a 'constructive' step

(Adds more Obama, background)

WASHINGTON, June 19 (Reuters) - U.S. President Barack Obama on Saturday welcomed China's announcement that it would resume exchange rate reform to make its yuan currency more flexible.

"China's decision to increase the flexibility of its exchange rate is a constructive step that can help safeguard the recovery and contribute to a more balanced global economy," Obama said in a statement.

Beijing said earlier that in light of the gradual recovery in the global economy, and as the recovery and upturn in the Chinese economy has become more solid, it wanted to proceed with currency reform and to make the yuan more flexible.

The decision came a day after Obama gave China a clear prod by extolling the benefits of market-determined exchange rates in a letter to G20 leaders before their summit in Canada on June 26-27.

The Group of 20 top industrial powers agreed at their last gathering in Pittsburgh to strengthen the global economy by rebalancing demand. This was a clear reference to countries like China, which critics say boost exports by manipulating their exchange rate to keep them artificially low.

"I look forward to discussing these and other issues at the G20 Summit in Toronto next weekend," Obama said.

(Reporting by Alister bull, editing by Doina Chiacu)