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G10 bankers could discuss recovery, dollar's weakness

The Group of 10 (G10) forum of central bankers, meeting in Basel, Switzerland, may signal concern that the US dollar's decline against the euro and the yen threatens recoveries in the dozen euro nations and Japan.

"Central bankers will certainly say that they won't accept a free fall of the dollar -- that's in nobody's interest," said Janwillem Acket, chief economist at Julius Baer Holding AG in Zurich.

"The situation isn't alarming yet, though," Acket said

The dollar has lost about a fifth of its value against the euro and a 10th against the yen in the past year, making European and Japanese goods more expensive in the world's largest economy.

Exports have kept the econ-omies of the euro region and Japan growing at a time when consumer spending stagnated.

The euro's increase prompted European Central Bank president Jean-Claude Trichet Thursday to comment on the effect it has on growth for the first time since he took charge of the central bank in November, saying it's having "a negative impact" on exporters.

Trichet will head the meeting tomorrow at the Bank for International Settlements, the organization that serves the world's central banks.

The ECB on Thursday left its main lending rate at 2 percent, the lowest in almost six decades, to help stimulate a recovery.

Central bankers from the nations regularly meet at the BIS to discuss the global economy and financial markets.

The G10 is made up of 11 nations -- the US, Canada, Italy, Germany, France, the UK, Japan, the Netherlands, Belgium, Sweden and Switzerland.

Trichet's comments didn't go far enough for politicians, including German Economics Minister Wolfgang Clement and Belgian Prime Minister Guy Verhofstadt, who called on the ECB to lower interest rates to stem the currency's increase.

French Finance Minister Francis Mer on Friday called on the Group of Seven major industrial countries to discuss the dollar's decline at their next meeting in February.

"I hope that we'll be able to clarify and stabilize the situation," Mer told France Info radio.

The euro climbed to a record Friday, buying US$1.2870 late on Friday in Frankfurt according to EBS prices, after a US government report showed the US economy gained 1,000 jobs in December, fewer than the 150,000 that economists had forecast.

For US President George W. Bush, the dollar's drop is helping boost US exporters' sales in an election year.

Given the spare capacity in the US economy, the currency's drop hasn't led to the acceleration in inflation that typically accompanies a weaker currency.

Federal Reserve policymakers, including Donald Kohn, have said the dollar's drop hasn't hurt the economy so far.
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