UPDATE 1-US unions urge Congress to pass China currency bill

* AFL-CIO presses for vote on Schumer-Graham bill

* US-China Business Council urges patience on yuan

* Analyst says unlikely Congress will act (Adds comments from senators, analyst; adds background)

WASHINGTON, July 9 (Reuters) - The largest U.S. labor group urged Congress on Friday to pass legislation to fight China’s currency practices, a day after the Obama administration again declined to label Beijing a currency manipulator.

The United States should also keep other options on the table, including a challenge of China’s currency practices at the World Trade Organization, Richard Trumka, president of the AFL-CIO labor federation, said in a statement.

Trumka said the Treasury Department’s decision ignored “the overwhelming evidence, including that in Treasury’s own report, that the Chinese government has systematically intervened in currency markets over many years to keep the renminbi undervalued by as much as 40 percent.”

He urged Congress to act swiftly to pass a bipartisan bill backed by Democratic senators Charles Schumer and Debbie Stabenow and Republican Senator Lindsey Graham, as well as 16 other senators.

Schumer, Graham and Stabenow all reaffirmed their plan to push for a vote on the bill, which would open the door for the United States to use its antidumping and countervailing duty laws against China’s exchange rate.

“The distortion of the Chinese currency has gone on too long and cost too many American jobs,” Graham said.

Stabenow said legislation needed to be passed “... that would require the U.S. Departments of Treasury and Commerce to take action and stop these countries from cheating.”

The Treasury Department on Thursday said China’s renminbi, also known as the yuan, remains undervalued but declined to formally label Beijing a currency manipulator, an action that would strain trade ties.

The department’s report, delayed from April 15, said China made a “significant” move last month by ending a peg between the value of the yuan and the dollar.

Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics, said Treasury made the right call given a sharp drop in China’s trade surplus this year and its recent steps on currency reform.

He doubted Congress would pass currency legislation.

“I think it’s not likely to happen this year” because of jurisdictional battles within Congress that tend to bog down currency-related bills, Lardy told Reuters Insider.

Some analysts think that even if the Senate does vote on the bill, President Barack Obama can count on leaders in the House of Representatives to keep it from reaching his desk.

House Ways and Means Committee Chairman Sander Levin, a Democrat, stopped short on Thursday of endorsing any specific legislation, but said the United States should explore bringing a WTO case against China’s currency.

Lardy said he would consider that “a long shot” since there is no precedent for challenging a country’s currency policies at the WTO.

A spokeswoman for the U.S. Trade Representative’s office said “it would not be appropriate” for the agency to comment on whether it intends to file a case.

Import-sensitive U.S. sectors like steel and textiles strongly back legislation, but many business groups like the U.S. Chamber of Commerce and the U.S-China Business Council have urged Congress not to rush to action.

“Since the June 19 announcement by China’s central bank, the renminbi has appreciated about 0.8 percent against the dollar -- that pace is close to 20 percent annualized, which isn’t insignificant,” said John Frisbie, president of the U.S.-China Business Council.

“That’s more movement than we expect to occur over the next 12 months, but let’s see how things evolve.” (Additional reporting by Glenn Somerville and Fred Katayama; Editing by Leslie Adler)