FOREX-Dollar hurt by G7, improving risk appetite

* Dollar slides, G7 reiterates familiar stance on FX

* Global shares rise, risk appetite improves

* U.S. service sector grows for first time in a year

* Aussie gains on speculation of rate hike this week (Updates prices, adds comments, changes byline)

By Leah Schnurr

NEW YORK, Oct 5 (Reuters) - The dollar slipped against other major currencies on Monday after a meeting of finance chiefs from the Group of Seven wealthy nations underscored the market's view that policy-makers are resigned to a gradually weakening dollar.

The dollar was also pressured as gains in global stock markets and data showing the U.S. service sector expanded in September for the first time since August 2008 boosted risk appetite and diminished safe-haven demand.

"The U.S. dollar is once again falling into the trap of being a safe-haven currency, and you can see ... most securities that have a tie into yield demand and risk appetite are rising," said John Kicklighter, currency strategist at DailyFX.com in New York.

Saturday's G7 statement offered nothing new to soothe concern over dollar weakness despite heated discussions of the issue in the run-up to the meeting. Traders bet on further dollar declines to help redress imbalances between net consumers like the United States and savers like China.

"What's weighing on the U.S. dollar right now is really a lack of consensus with respect to the dollar's direction coming out of the (G7) meeting," said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto.

With the communique seen as an acceptance of the dollar's current value, currency investors focused their attention on the broader risk sentiment in markets, Spitz said.

In midafternoon New York trading, the euro climbed 0.6 percent to $1.4648 .

The need to rebalance the global economy does not at all mean the dollar should depreciate against the euro, European Central Bank President Jean-Claude Trichet told Reuters television on Monday. For more see [ID:nL535012].

The ICE Futures U.S. dollar index <.DXY>, a measure of the greenback's performance against six other major currencies, was down 0.4 percent at 76.719.

RISK APPETITE

The Institute for Supply Management's services index rose to 50.9 last month from 48.4 in August, above expectations for a rise to 50.0, which is the dividing line between growth and contraction. [ID:nN05400003]

The data came after a report on Friday showed U.S. employers cut far more jobs than expected last month, bolstering expectations the Federal Reserve will keep interest rates at near zero for a prolonged period.

Worries sparked by the jobs report that the United States may be lagging other countries in the recovery process have weighed on dollar sentiment, said Boris Schlossberg, director of currency research at GFT Forex in New York.

"There's a sinking realization that the problems with the U.S. economy are just structurally so much more severe than anywhere else," he said. "That means on a relative basis, everybody outgrows the United States and this makes it very unappealing to own dollars."

The dollar fell 0.3 percent to 89.51 yen , above a recent eight-month low of 88.23 yen hit on electronic trading platform EBS. Japanese Finance Minister Hirohisa Fujii on the weekend said Japan would take action against what it perceived as excessive, one-sided moves in the yen.

The Australian dollar rose 1.4 percent to US$0.8772 , after two influential columnists said the country's central bank would probably raise rates to 3.25 percent from a record low 3.0 percent at Tuesday's policy meeting. [ID:nSYD44556]

Still, many in the market expect the Reserve Bank of Australia is more likely to raise the cash rate from 3.0 percent in November.

The ECB and the Bank of England will also announce policy decisions this week. Both are seen holding rates on Thursday. (Additional reporting by Wanfeng Zhou and Steven C. Johnson; Editing by James Dalgleish)