The U.S. dollar lost ground versus major rivals Friday as finance ministers and central bankers from the world's most powerful economies gathered in Washington.
The dollar index a measure of the U.S. unit against a trade-weighted basket of currencies, traded at 84.989, down from 85.353 in North American trade late Thursday.
The U.S. dollar dropped versus the Japanese currency to trade at 96.87 yen, down from 98.05 yen.
Officials from the Group of Seven nations, or G7, are set to meet this afternoon ahead of the weekend spring meetings of the International Monetary Fund and World Bank. The G7 gathering will be followed by a meeting of the broader G20, which includes China and other powerful emerging economies.
The G7 includes the United States, Japan, Germany, France, Great Britain, Italy and Canada.
G7 officials have signaled there will be no major changes to currency-related language in the group's joint statement. The primary focus, currency analysts said, will be on the gathering of the G20.
In particular, markets will be looking for any clues as to discussions with Chinese officials over calls by China's central bank chief for replacement of the U.S. dollar as the world's premier reserve currency by IMF special drawing rights, a quasi-currency issued by the institution and weighted according to a mix of major currencies. See full story.
"Though we expect this to be more of an issue in the medium- to long-term, any new signs that other emerging markets beyond Russia support this stance could add fuel to our bearish conviction on the dollar," wrote strategists at Standard Chartered Bank.
Washington will also be closely watched for of banking sector stress test and data on durable-goods orders and new-home sales.
The euro extended recent gains, boosted by a sharper-than-expected rebound in the Munich-based Ifo Institute's German business climate index. See full story.
The euro traded at $1.3245 versus the dollar, up from $1.3145 late Thursday.
The leading indicator rebounded from an 18-year low at 82.2 in March to 83.7. The rise followed gains posted by April euro-zone purchasing managers indexes on Thursday, reinforcing ideas the deep euro-zone recession, while far from over, will begin to moderate in the second quarter, economists said.
The British pound lost ground after the U.K. Office for National Statistics said the nation's economy saw a sharper-than-expected 1.9% quarterly contraction in the first three months of 2009, the steepest drop since 1979. See full story.
The pound traded at $1.4617, down from $1.4719 versus the dollar late Thursday.
The recession accelerated from the 1.6% contraction seen in the final quarter of 2008. Economists had expected a similar decline in the first quarter.
The figures underlined worries about Britain's long-term fiscal outlook. A report in Friday's Daily Telegraph newspaper said rating agencies were reviewing Wednesday's annual U.K. budget with an eye toward a possible cut in Britain's AAA credit rating.
But damage to the pound was limited, said strategists at Brown Brothers Harriman.
British consumers increased spending in March despite the deepening recession, according to the ONS. The agency said seasonally-adjusted retail sales rose 0.3% in March after falling by a downwardly-revised 2% in February. Compared to March 2008, sales were up 1.5% compared to a 0.4% annual increase in February.
