G20 Unlikely To Bolster Buck. By Katie Martin

Will the Group of 20 industrial and developing economies come to the rescue of the dollar?

Don't bet on it.

It's tough to imagine a better setting for world leaders to talk up the wobbling buck, as the G20 starts its two-day meeting in Pittsburgh later Thursday with the dollar looking shaky against other major currencies.

Indeed, earlier this week, it tumbled to 13-month lows, before a pick-up overnight.

But probably the best way for the G20 to really pump it back up again would be to spook the markets with the prospect of turning off the super-loose monetary policy life support that's keeping the current surge in risky assets on track.

That would almost certainly provoke a rush back into the warm arms of the safe-haven dollar. But somehow it doesn't sound likely, or desirable.

Sure, so-called exit strategies from feeble interest rates and, moreover, massive central bank asset purchases, are likely to come up in conversation at the meeting.

But unless the forthcoming meeting is forever to be known as 'the G20 that killed the recovery,' it's unlikely to happen.

At most, said analysts at Barclays Capital Wednesday, "it seems more likely that the specifics in terms of timing will be avoided, with the G20 instead simply promoting the importance of developing a strategy... An explicit commitment is unlikely."

The other tool at the G20's disposal for boosting the buck is a dose of verbal intervention. Commentary on the dollar's status is certainly a possibility, particularly after French President Nicolas Sarkozy said recently that the G20 should discuss "how to avoid the developments in the levels of key exchange rates which could lead to very serious tensions."

But if anything, that commentary could hit, rather than support, the currency. Remember - this is a G20 meeting, not a G7 meeting. That means all the creditor nations that have at times bemoaned the dollar's reserve status will be there.

"While it is unclear whether or not the dollar's status will be a high priority item on the agenda, U.S. creditor nations may choose to express reservations over current U.S. fiscal and monetary policy in private, or during the bilateral meetings," said Geoffrey Kendrick, a currencies analyst at UBS in London.

However, as Kendrick added, "most G20 nations know the consequences of a steep dollar decline at this stage in the cycle, and would likely try to avoid a disorderly move in the foreign exchange markets at all costs."

Positive verbal intervention aimed at boosting the buck also seems unlikely, particularly as U.S. officials have been notably quiet on the subject of late.

Verbal intervention doesn't even really work without the support of monetary policy, so there would be little point in trying to do it now.

Broadly, then, while sterling could stumble on statements about tighter financial regulation, because of its close correlation with banking stocks, other currencies are likely to hold steady as the meeting treads a fine line of encouraging a recovery without blowing up any asset bubbles.

That simply has to be supportive to risky assets, which in turn is bad for the dollar. After all, there are still a lot of investors out there who have yet to fully buy into the recovery theme.

As Barclays Capital pointed out this week, hedge funds are broadly confident in the global recovery but hesitant to bet the farm on it. They're still holding a bit back in safe havens while they wait for a trigger to jump in with both feet.

If the G20 meeting provides that trigger, it's reasonable to expect the dollar to suffer.

In early European trading Thursday, the euro was trading at $1.4738, a shade below its level in late New York hours Wednesday, according to EBS.

The European currency had surged to $1.4845 in the immediate aftermath of Wednesday's U.S. Federal Reserve meeting, where a slight upturn in confidence at the Fed had initially boosted rikier assets and dented the buck. But that sentiment didn't last long.

The dollar was lower against the yen, at Y90.73 from Y91.32. The euro was also lower at Y133.71 from Y134.64.

The pound was steady at $1.6357 after a post-Fed slump that dragged it down from $1.6467. The dollar was flat at CHF1.0260 against the Swiss franc.