The People's Daily newspaper online edition said a yuan appreciation would be announced, possibly by widening the narrow band in which it is allowed to trade against the dollar.
But China's central bank, the People's Bank of China, said the report, a translation of a weekend news story, was wrong.
"There has been no policy change on the renminbi (yuan)," said a central bank spokesman. "Some mistakes occurred in the translation."
The report, coming after repeated calls from the United States and other countries for China to let the yuan appreciate, sent the dollar diving against Japan's yen. The yen, like several other Asian currencies, is often viewed as a proxy for the yuan and frequently rises when yuan speculation heats up.
U.S. Treasuries prices briefly fell, on investor worries that a yuan revaluation would be accompanied by a decline in China's massive buying of U.S. government debt.
"A knee-jerk reaction to China currency changes would be negative as China is subsidizing U.S. spending and if that suddenly stops it could have an impact," said ABN AMRO bond strategist Harvinder Sian.
"Clearly the market is pumped up about revaluation," said Sian. "Momentum about currency change is gathering pace."
Markets have speculated for months that the yuan will be allowed to appreciate as part of China's first significant currency reform since the Asia crisis of 1997/98 and there was a similar wobble two weeks ago when the yuan briefly traded outside its authorized band.
That trade outside the razor-thin band of 8.2760 to 8.2800 per dollar was blamed on a trading error.
"The People's Daily report is certainly more credible than most that we've had recently, but I'm still not convinced they are going to do it," said Adrian Foster, head of currency strategy at Dresdner Kleinwort Wasserstein.
While Washington argues the level of the yuan's trading band is too low, making Chinese exports unfairly cheap, Beijing has resisted both diplomatic and speculative pressure for a one-off yuan revaluation.
Chinese officials have pledged to push gradual reforms to make the exchange rate more responsive to market forces.
An official for the People's Daily, which is the mouthpiece of the ruling Communist Party, said the report was a translation of a May 7 news agency article.
The People's Daily had not cited a source for the information, a common style in official Chinese media.
"The appreciation of the people's currency as wished for by the international financial market will be announced to revaluate or expand the margins of its exchange rate," the paper said.
The newspaper had said the announcement would come after a meeting next week between the "U.S. financial minister" and an official from the Chinese central bank.
The news agency report had attributed the prospects of a yuan appreciation to market expectations.
It said estimates were for a yuan revaluation of 1.26 percent in one month and 6.03 percent in one year.