Kimmitt: Yuan needs to appreciate more

LONDON (Reuters) - The United States recognizes the moves China has made to free up its currency but believes the yuan needs further "significant" appreciation to help redress global imbalances of trade and investment flows, a leading U.S. official said on Tuesday.

"We need to see significant appreciation in the Chinese currency," Robert Kimmitt, Deputy Treasury Secretary, told Bloomberg TV.

"I would note that there has been increased appreciation, but we still think it's important for China to move forward to a market valuation of its currency," he said.

China has loosened currency controls in recent years, which has seen the yuan appreciate against a broadly declining dollar.

But some observers are concerned Beijing, with almost $1.6 trillion in foreign exchange reserves, could take fright along with other holders of massive reserves at the falling dollar value of these assets and begin to diversify out of those dollar-denominated holdings.

Kimmitt, however, said U.S. credit markets, particularly the Treasury market, remained attractive enough to continue luring foreign investment and liquid enough to withstand any diversification.

"We think that (Treasury) market is very healthy and will continue to be very healthy even as countries make their individual investment and diversification decisions," Kimmitt said.

(Reporting by Jamie McGeever; editing by Mike Peacock)