U.S. Treasury Secretary Henry Paulson indicated on Wednesday that he was pleased with the rise in the yuan.

Paulson, who is in Beijing for talks with Chinese leaders, made the comments to reporters after giving a speech about energy and the environment, according to Reuters.

Appreciation so far has been good and gives a tool for dealing with rising inflation, Paulson said.

The yuan is trading near its highest level since it got rid of its peg to the dollar in 2005, rising about 4 percent against the dollar since the start of the year.

Inflation in China has been rising steadily. Leaders in China have called the task of reining in the nation's rising inflation their number one priority.

China's economy is so large, complex and integrated that it is dangerous if it does not have an RMB that reflects fundamentals, he added.

The yuan closed at 7.0184 versus the dollar, down from 7.0116 on Thursday.

Energy Inflation China