* Dollar slips after G20 draft communique
* Yen rallies, pushes through 90 yen per dollar
* Euro rises on strong U.S. consumer sentiment report
* Sterling takes a hit, falls to 4-mth low vs dollar
(Recasts, updates prices, adds detail, comment)
By Steven C. Johnson
NEW YORK, Sept 25 (Reuters) - The dollar sank to a
7-1/2-month low beneath the key 90-yen level on Friday after
the G20 pledged to keep up emergency stimulus spending until a
recovery takes hold, suggesting U.S. interest rates would
remain very low.
The yen got a boost after Finance Minister Hirohisa Fujii
and an influential former finance official suggested
separately that authorities were not inclined to halt the
currency's rise. For details, see []
Analysts also said investors repatriating funds before
Japan's fiscal year hits the halfway mark on Sept. 30 also
lifted the yen.
"The comments suggesting Japan is more comfortable with a
strong yen helped, but it's also a capital flow story with a
lot of money coming back at midyear," said Greg Salvaggio, vice
president of trading at Tempus Consulting in Washington.
The dollar was last down 1.6 percent at 89.80 yen <JPY=>
after hitting 89.52 yen earlier, the lowest since February. The
euro also fell 1.5 percent to 131.84 yen <EURJPY=>.
The dollar fared better against sterling, which fell to
multi month lows a day after Bank of England Governor Mervyn
King said a weak pound would help exports and the UK economy.
But the euro edged higher against the greenback, helped by
encouraging data showing that U.S. consumer sentiment hit its
highest level this month since January 2008. []
The euro rose 0.1 percent to $1.4680 <EUR=>, boosted after
encouraging U.S. consumer sentiment data and a separate report
showing U.S. new homes sales edged up in August.
The dollar suffered after a draft G20 statement
obtained by Reuters showed that leaders from the leading rich
and developing countries intend to maintain emergency support
until their economies recover and then work together to scale
back spending. []
Investors said that means interest rates are likely to
remain low, with record low U.S. rates keeping the dollar under
pressure.
"The cyclical argument has not changed to favor the
dollar," said Michael Klawitter, senior currency strategist at
Commerzbank in Frankfurt.
While many in the market believe a U.S. rate rise is also
far off, Federal Reserve Board Governor Kevin Warsh said on
Thursday the U.S. central bank may have to raise rates before
the need to take action becomes obvious.
That helped the dollar overnight, though the gains faded
before North American trading got underway. []
The pound <GBP=D4> fell to $1.5917, its lowest since early
June, before edging back to $1.5974, down 0.6 percent. It sank
against the yen <GBPJPY=R>, falling as low as around 144.30
yen, its weakest since mid-May, while the euro rose above 92
pence <EURGBP=> for the first time since April.
King's comments hit the currency, as did perceptions that
the Bank of England will lag other central banks in ending its
loose monetary policy.
(Additional reporting by Emelia Sithole-Matarise in London
and Wanfeng Zhou in New York; Editing by Andrew Hay)
