Financial markets on Thursday bet against the weekend Group of Seven economic powers meeting agreeing on how to tackle currency swings, sending the dollar lower against the euro.
A day before the meeting starts in Florida, French Prime Minister Jean-Pierre Raffarin urged the club to agree on the need to avoid currency fluctuations distorting the world economy - a line the United States has shown little sign of backing.
Japan also stood firm ahead of the meeting of G7 finance ministers and central bankers, saying it would act against speculative currency moves - a sign that it would not flinch at any criticism of its intervention tactics.
Despite Japan's firm position, and the United States' eagerness to focus on growth rather than the dollar's fall at the meeting, Raffarin called for an agreement on currencies.
"Productivity...should not be undermined by inequality or great fluctuations in exchange rates which are not adapted to the reality of our economies," he said in a speech to leaders of European Union centre-right parties in Brussels.
"We want exchange rates which are adapted to the reality of our economies. That is why I want the G7 to reach agreement on this diagnosis of the situation," Raffarin added.
His comments failed to ease the euro's rise against the dollar, with the single European currency edging up to around $1.2585 - some three cents below record highs it hit in January - after the European Central Bank (ECB) left interest rates unchanged.
On Tuesday, US Treasury Secretary John Snow effectively ruled out an accord on currencies at the meeting on Friday and Saturday in Boca Raton, repeating that markets, and not governments, should set rates.
Policymakers in Europe have stressed the risks the dollar's fall poses to euro zone exporters, but a Reuters poll of 46 currency strategists showed few expect the G7 to say anything to stop the euro, yen, sterling and the Canadian dollar from appreciating.
ECB President Jean-Claude Trichet said after the bank left rates unchanged at 2.0 percent that it remained concerned about excessive foreign exchange moves.
"With regards to exchange rates we again particularly stress stability and express concern about exaggerated exchange rate movements," Trichet told the ECB's news conference.
Some strategists say the summit of the G7 powers - the United States, Japan, Germany, Britain, France, Italy, and Canada - could put pressure on eurozone policy makers to cut interest rates, which are twice the 1.0 percent in the United States, increasing the attraction of holding euros.
Allowing the yen to rise further could also spread more of the pain of dollar weakness beyond the eurozone.
But Japan showed little sign of giving up its efforts to subdue the yen's rise. Bank of Japan Governor Toshihiko Fukui said the yen's recent rise posed short-term risks.
"A strengthening of the currency in itself is fine for us, but in the short term we must carefully watch its impact," Fukui said. "We must watch the impact on business sentiment."
He also said the government's repeated yen-selling intervention did not conflict with the central bank's monetary easing that was aimed at lifting the country out of deflation.
The Japanese Finance Ministry took an even stronger line.
"We will state our usual stance that sudden moves in exchange rates are undesirable and have an impact on the Japanese economy and on the world economy. And therefore, when moves are excessively speculative, we will take firm action," Vice Finance Minister Masakazu Hayashi said.
A Canadian official said on Wednesday the G7 would discuss China, the biggest of several Asian economies whose exporters are benefiting from currency links to the weakening dollar.
But strategists say the G7 could do little to spread the burden of the dollar's weakness beyond the group as China is not in the club.
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