The dollar rebounded against a nearly record-high euro Friday on expectations that the Group of Seven would maintain its position on addressing worldwide economic imbalances. The euro bought $1.3511 in afternoon trading after climbing as high as $1.3547 earlier in the session _ its highest level since January 2005. That compared with the $1.3480 it bought in New York late Thursday, and was about one cent short of its all-time high from December 2004 of $1.3667, according to AP. The dollar bounced back on expectations that the G-7 finance officials' communique Friday would propose continued weakness to stabilize global trade and account imbalances. Word from an Italian representative, though, that yen carry-trading would enter the discussions prompted some dollar selling, according to Michael Woolfolk, senior currency strategist at the Bank of New York. The G-7's position on yen carry-trading, which involves borrowing money at Japan's low interest rates to invest in higher-yielding assets elsewhere, likely will not rise to the level of inclusion in the communique, however, Woolfolk said. «This may be something of a tempest in a teacup,» he said. The dollar also lost ground against the British pound, which rose to $1.9825 from $1.9783, while strengthening against Japan's currency to 119.25 yen from 119.06 yen. The dollar fell against the euro earlier in the session after the European Central Bank on Thursday left its benchmark rate unchanged at 3.75 percent but appeared to set the scene for an increase to 4 percent in June. Higher interest rates, used to combat inflation, can bolster a currency by making certain types of investments relatively more attractive. The Federal Reserve has left rates unchanged over recent months even as the ECB steadily increased the cost of borrowing. The euro slipped slightly after the release of data showing that U.S. wholesale prices increased by 1 percent in March, although, with volatile energy and food prices removed, other prices were flat. Evidence that inflation has not spread through a wider range of goods might put less pressure on the Fed to raise rates. Separately, the Commerce Department said the U.S. trade deficit lessened for a second month, with oil imports down sharply and the politically sensitive deficit with China narrowing to its lowest point in nine months. In other trading, the dollar bought 1.2157 Swiss francs, down from 1.2167 late Thursday, and 1.1384 Canadian dollars, up from 1.1348. -- SPA
