* Yen rallies, pushes through 90 yen per dollar
* Dollar slips broadly after G20 draft communique
* Sterling takes a hit, falls to 4-mth low vs dollar
(Recasts with yen rally, fresh quotes, changes byline)
By Emelia Sithole-Matarise
LONDON, Sept 25 (Reuters) - The dollar fell more than 1 percent against the yen to a 7-1/2 month low on Friday as the G20 pledged to maintain economic stimulus and Japanese half-year end dividend repatriations undermined flows into the greenback.
The dollar slipped against most major currencies too after a draft communique from Group of 20 leaders said the economic support measures would remain in place for now, suggesting U.S. interest rates would stay low.
The dollar fell below 90 yen to its weakest since mid-February.
"It may also be the case that we are seeing some dividend repatriation flows coming through at the current juncture, which may also keep the yen rather pressed to the topside and dollar/yen to the downside as a consequence," said Jeremy Stretch, a currency strategist at Rabobank in London.
Some in the market cited a report that a former Japanese finance ministry official said Japanese authorities would be unlikely to take action against the yen's rise through the psychologically key level as contributing to the move.
Eisuke Sakakibara, vice finance minister for international affairs in 1997-1999, told Dow Jones Newswires the MoF would not be concerned by a dollar move below 90 yen but might consider action if it fell below 85 yen.
A move below 80 yen might be viewed as "abnormal", said Sakakibara, who earned the nickname "Mr Yen" and is still considered by some to be influential.
The dollar dipped to 89.97 yen, according to Reuters data, down more than 1 percent on the day.
"Obviously the market wanted to try and test the downside in dollar/yen and see if they could break that 90 level and trigger any option barriers that were there," Stretch said.
"We've had a little brush with that break below the 90 mark for now. It's proved relatively temporary but there may be a case to say we might try to test it again this afternoon, particularly if equity markets are finding late European session uncertainties."
The yen rose sharply against other currencies while the trade-weighted value of the dollar was down about 0.3 percent on the day.
G20 leaders, meeting in Pittsburgh, pledged to maintain emergency economic support until a durable recovery is secured and to work together when the time comes to remove them, a draft communique obtained by Reuters showed on Friday.
Analysts said the communique suggested recovery in the U.S. economy would take more time and U.S. rates would stay near zero. This would restrict demand for the low-yielding dollar, even as global economic weakness kept risk demand in check.
"The (G20) is making clear that stimulus will stay in place until a recovery is sustainable," said Michael Klawitter, senior currency strategist at Commerzbank in Frankfurt, adding this suggested interest rates, including those for the dollar, would remain low for a while yet.
"The cyclical argument has not changed to favour the dollar."
By 1149 GMT, the euro was up 0.2 percent on the day at $1.4687, recovering from a fall to as low as $1.4614 earlier in the day. The European single currency hit a one-year peak of $1.4845 on Wednesday on trading platform EBS. The U.S. currency erased gains made earlier in the day, when it had rallied after major central banks said on Thursday they would jointly scale back massive injections of dollars.
STERLING ON THE ROPES
Sterling hit multi-month lows against the dollar, euro and yen as traders continued to dump the UK currency a day after Bank of England Governor Mervyn King highlighted the benefits to the UK economy from a weaker pound.
The pound has been under pressure on perceptions the Bank of England may lag other central banks in ending its ultra-loose monetary policy.
Sterling was down nearly a percent against the Norwegian crown at 9.2580. The Norwegian central bank held interest rates steady this week but said it had considered a rise. Some analysts expect a hike next month.
The pound fell as low as $1.5917, its lowest since early June, before edging back to $1.5997, down 0.4 percent on the day. It sank against the yen, falling as low as around 144.30 yen, its weakest since mid-May.
(Additional reporting by Jamie Mcgeever)