* Geithner calls for G20 not to block currency appreciation
* Doubts remain on coordinated G20 action on forex
* Dollar index up 0.1 percent at 77.513 .DXY.
* German Ifo index unexpectedly rises in October
(Adds quote, updates prices)
By Tamawa Desai
LONDON, Oct 22 (Reuters) - The dollar steadied on Friday on wariness over whether any clear agreement would be reached at a Group of 20 meeting, as the United States called for countries to avoid using their currencies to gain an economic advantage.
U.S. Treasury Secretary Timothy Geithner, in a letter to finance leaders that was seen by Reuters, said emerging economies with undervalued currencies and solid reserves must allow their currencies to adjust in line with fundamentals, [ID:nTOE69L05V] while a G20 source told Reuters he also called for a 4 percent cap on current account imbalances. [ID:nTOE69L054]
"A new currency accord will be hard to achieve in principle and even harder to push through in practice, over the hurdles of domestic political pragmatism," said Lena Komileva, head of G7 market economics at Tullett Prebon.
Many in the market were also sceptical of whether a binding agreement would be reached. But they remained cautious about any surprises such as a formal pact to allow Asian currencies to appreciate.
By 0925 GMT, the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.1 percent at 77.513 .DXY.
For graphics on FX tensions, please click on
FX tensions interactive map: r.reuters.com/jec96p
Asset returns since QE2 hints: r.reuters.com/kyw48p
China data package: link.reuters.com/tuz49p
Geithner also said "to facilitate the orderly rebalancing of global demand, G20 countries should commit to refrain from exchange rate policies designed to achieve competitive advantage by either weakening their currency or preventing the appreciation of an undervalued currency."
FED IS THE STORY
Still, analysts expect the dollar to stay under pressure from expectations that the U.S. Federal Reserve will pump more money into the economy at a policy meeting next month. That has helped push the dollar down more than 7 percent against other major currencies since September.
"The dollar remains on the back foot until the Fed; that is the main story," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.
The euro briefly made up its losses and rose 20 pips against the dollar after the German Ifo institute's business sentiment index unexpectedly rose in October to 107.6 from 106.8. [ID:nBAE003838] It was last flat at $1.3911. EUR=
"Economic indicators in the euro zone have consistently surprised to the upside recently, and this is likely to put further upside pressure on the euro in the coming weeks," analysts at Credit Agricole CIB said.
The dollar slipped 0.3 percent to 81.28 yen JPY=, holding above a 15-year low of 80.84 yen hit earlier this week and a record postwar low of 79.75 yen set in 1995.
Wariness about intervention has kept the dollar supported, after Tokyo stepped into the market in September for the first time in six years. (Editing by Hugh Lawson/Ruth Pitchford; Graphics by Scott Barber)