G7 statement may help slow dollar's decline

By Nick Olivari

NEW YORK (Reuters) - The U.S. dollar's steady decline may at least slow in the near term on the back of the Group of Seven's strongest statement of concern on currency fluctuations in seven years, analysts said.

The G7's statement from a meeting in Washington was explicit about possible consequences from currency swings and conveyed increased alarm about persistent currency volatility with the euro/dollar still trading near a record high.

"Since our last meeting, there have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability," the group of leading industrial nations said in the statement on Friday.

It was the dramatic change to the G7's declaration on currencies since the Boca Raton meeting in 2004, when those same leading industrialized nations first expressed worry currency volatility could imperil growth.

It was the first time since the Prague G7 meeting of 2000 that the seven rich nations have united to voice explicit concern about moves in major currencies, though then it was a weakening euro that caused concern.

"If there is going to be a reaction it will be dollar positive," said Kathy Lien, chief strategist of Forex Capital Markets. "The tone of the G7 statement hints they are serious about taking coordinated action."

The U.S. currency fell to a record low against the euro of $1.5912 this week, according to Reuters data. The U.S. unit is down 7.7 percent in 2008 to date at Friday's closing price for the euro of $1.5804.

The dollar is down 9.3 percent against the yen in 2008, date and in March fell to its lowest in more than 12 years, according to Reuters data.