Chinese interest rate hike is consistent with a move towards flexible exchange rates, US Treasury Department Under-secretary for International Affairs John Taylor said on Thursday.
The dollar flitted in narrow ranges after the remarks.
"This is part of a series of moves to reduce inflationary pressures on China", Taylor told a press briefing about the global economy in New York.
"It is also consistent with a move to flexible exchange rates, which China has shown it wants to do," Taylor said.
Earlier on Thursday, the dollar fell in choppy trade as traders tried to assess what the surprise increase in Chinese interest rates meant for currencies.
The dollar initially rallied against the yen and currencies of major commodity-producing countries, as traders reckoned a slowdown in China's economy would depress demand for raw materials and hurt its Asian neighbours.
But the dollar soon fell as the market mulled whether the rate hike suggested a revaluation might be in the offing for China's currency, the yuan, which many US exporters say is pegged at an artificially low rate, boosting China's exports.
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