G7 silence on dollar an invitation to sell

By Steven C. Johnson

WASHINGTON (Reuters) - Already at an all-time low against the euro, the dollar looks set to plumb new depths this week after Group of Seven finance chiefs ended a weekend meeting without offering verbal support for the U.S. currency.

While the G7 did urge China to speed up appreciation of the yuan, its failure to address dollar weakness, notably against the euro, suggested traders need not fear any coordinated official efforts to prop up the greenback.

"The G7's statement effectively gives a green light to continue selling the dollar," said Michael Woolfolk, senior currency strategist at The Bank of New York Mellon.

He said the euro is likely to break through its record high above $1.43 and soon make a run at $1.4550, which corresponds with the German mark's all-time high against the dollar.

"That has certainly come into speculators' crosshairs," he said.

After shedding 8 percent last year, the dollar has fallen by another 7 percent in 2007, mostly on fears that the Federal Reserve will cut interest rates further to stave off recession caused by a U.S housing slump and global credit crunch.

Traders responded by pushing the euro to a record high of $1.4319 and the greenback to its lowest level against a basket of currencies since the free-floating exchange rate regime was set up in the 1970s.

That led some European countries to complain the strong euro risked hurting exports and the euro zone economy, and to call on the G7 finance ministers and central bank governors.