* Obama urged to mull IMF, WTO options to pressure China
* Letter to Obama softer in tone than last year's to Bush
* Treasury faces April 15 deadline on exchange rate report
By Doug Palmer
WASHINGTON, March 30 (Reuters) - President Barack Obama should consider new steps to stop "China's ongoing manipulation of its currency," including a possible case at the World Trade Organization, U.S. congressional Democrats said on Monday.
"We urge the new administration to consider a new approach," top Democrats on the House of Representatives Ways and Means Committee said in a letter to Obama one day before the U.S. Trade Representative's office was scheduled to release its annual report on foreign trade barriers.
Many U.S. lawmakers have complained for years that China's currency is undervalued and gives Chinese companies an unfair price advantage. The concern is fueled by the huge U.S. trade gap with China, which hit a record $266.3 billion in 2008.
Obama will meet with Chinese President Hu Jintao later this week in London, where both are attending a summit meeting of the Group of 20 developed and developing countries.
Last year, House Ways and Means Democrats used the March 31 trade barriers report to excoriate the administration of former President George W. Bush for failing to aggressively enforce U.S. trade agreements and act on currency concerns.
They demanded Bush immediately begin formal WTO consultations with China and to "file a WTO action if China does not agree swiftly to begin to revalue the yuan."
This year's letter to Obama was softer in tone, but said the Bush administration policy of "quiet diplomacy" to pressure China to raise the value of its currency had failed.
They urged Obama to consider several options to increase multilateral pressure on China, including insisting the International Monetary Fund enforce its rule that members "avoid manipulating exchange rates ... to gain an unfair competitive advantage over other members."
Other actions could include bringing a case at WTO, beginning multilateral talks aimed at reducing currency-driven imbalances and enforcing existing U.S. trade and exchange rate laws, the Ways and Means Democrats said.
During last year's campaign, Obama also criticized China for manipulating its currency. Earlier this year, U.S. Treasury Secretary Timothy Geithner angered Beijing when he repeated those comments to the Senate Finance Committee.
China has proposed shifting away from a dollar-dominated world in favor of new a global reserve currency under the International Monetary Fund. That has prompted both Obama and Geithner to defend the current system.
The Obama administration soon will have its first official chance to say whether it believes China is manipulating its currency when the Treasury Department issues a semi-annual report on foreign exchange rate practices.
That report is due on April 15, but is often late because of the sensitivity of the issue.
The Ways and Means Democrats noted the Bush administration was the only one not to label any country as a currency manipulator since the report was created in 1988.
"China's massive, prolonged, one-way and sterilized intervention in the currency market, its unprecedented foreign exchange accumulation ($1.9 trillion), and its massive current account surplus demonstrate that, once again, China is manipulating its currency," the lawmakers said. (Editing by Mohammad Zargham)