* Geithner calls for G20 not to block currency appreciation
* Doubts remain on coordinated G20 action on forex
* Dollar index up 0.3 percent at 77.667
* German Ifo index unexpectedly rises in October
(Releads, adds quotes, changes dateline from TOKYO)
By Tamawa Desai
LONDON, Oct 22 (Reuters) - The dollar pared its losses 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 "countries with persistent surpluses should undertake structural, fiscal and exchange rate policies to boost domestic sources of growth".
A financial source who met with Geithner in South Korea said that the U.S. official had asked countries to limit their current account surpluses or deficits to 4 percent of gross domestic product. But that seemed to be something that few G20 members felt able to accept.
As such, many in the market were 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 0812 GMT, the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.3 percent at 77.667.
"We are not looking for something significant from the G20, although in the statement they could portray competitive devaluation as something that is negative," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.
"Some form of current account target, if introduced, would be a positive step, but I can't see that gaining consensus."
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 on expectations for the U.S. Federal Reserve to 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," BTM-UFJ's Hardman said.
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. It then fell back to $1.3872, down 0.3 percent.
The dollar slipped 0.1 percent to 81.30 yen, 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 Japan intervened in September for the first time in six years.
"People are just not quite sure what Japan's tactics are on the currency and how afraid they should be. But clearly there is a little bit of unease about putting on a fresh short position from here," said Sean Callow, a currency strategist at Westpac Bank in Sydney. (Additional reporting by Hideyuki Sano in Tokyo; Editing by Hugh Lawson; Graphics by Scott Barber)