UPDATE 1-Obama tells Hu that Chinese currency undervalued

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WASHINGTON Jan 19 (Reuters) - U.S. President Barack Obama said he told visiting Chinese President Hu Jintao on Wednesday that China's currency is undervalued and should be increasingly driven by markets.

Obama also told a joint news conference that the United States and China have a responsibility to tackle climate change and build on international pledges made at summits in Copenhagen and Cancun.

Obama used his opening statement to address one of the major economic disputes between the United States and China -- Washington's contention that China's currency is undervalued and is hurting the U.S. economy as a result.

"I told President Hu that we welcome China's increasing the flexibility of its currency. But I also had to say that the renminbi remains undervalued, that there needs to be further adjustment in the exchange rate," Obama said.

Obama said he told Hu that changing the yuan policy "can be a powerful tool for China boosting domestic demand and lessening the inflationary pressures in their economy."

"So we'll continue to look for the value of China's currency to be increasingly driven by the market, which will help ensure that no nation has an undue economic advantage," he said.

Hu said the two leaders discussed disagreements on economic issues and trade.