Dollar steadies in London

The dollar steadied on Friday as investors hesitated about extending bearish bets against the greenback on uncertainty over whether any agreement would be reached at a weekend meeting of Group of 20 finance leaders. The United States raised its rhetoric, calling for countries to avoid using their currencies to gain an economic advantage, but its proposal to put a numerical cap on current account balances ran into stiff opposition from Japan, Germany and some emerging countries.
US Treasury Secretary Timothy Geithner, in a letter to G-20 finance leaders that was seen by Reuters, said emerging economies with undervalued currencies and solid reserves must allow their currencies to adjust in line with fundamentals. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was flat at 77.41 but off the day's low of 77.209.
"A new currency accord will be hard to achieve in principle and even harder to push through in practice, over the hurdles of domestic political pragmatism," said Lena Komileva, head of G7 market economics at Tullett Prebon. Many in the market were sceptical of whether a binding agreement would be reached. But they remained cautious about any surprises such as a formal pact to allow Asian currencies to appreciate.
Analysts said such a pact could include assurances from the United States that any quantitative easing (QE) from the Federal Reserve would be modest. Any such assurance could provide a short-term boost to the US dollar and would ease the pressure on Asian central banks to intervene and check their currencies' strength. The dollar also made solid gains against the Swiss Franc, rising to a three-week high of 0.9778 francs on steady buying by semi-official names.
The euro briefly recovered losses, rising after the German Ifo institute's business sentiment index unexpectedly rose in October to 107.6 from 106.8. Higher interbank euro rates were also supportive, but overall the single currency struggled to stay in positive territory and was last marginally higher on the day at $1.3930. The dollar slipped 0.26 percent to 81.15 yen, holding above a 15-year low of 80.84 yen hit earlier this week and a record post-war low of 79.75 yen set in 1995.