* Dollar pares losses as G20 finmin meet gets underway * MSCI world equity index slips 0.2 percent, losses limited
* Weak dlr, strong stocks seen on view for more Fed QE view
By Naomi Tajitsu
LONDON, Oct 22 (Reuters) - The dollar pared losses on Friday as investors were uncertain whether the United States would gain support at a G20 meeting in calling for countries to avoid weakening their currencies to gain an economic advantage.
European shares slipped on caution as the G20 finance ministers' meeting got underway, but losses were limited as the spectre of more quantitative easing by the Federal Reserve next month supported equity markets around the world.
U.S. shares were expected to open lower, after Asian shares were little changed.
Short-dated German government bond yields rose after an unexpected rise in German business sentiment reinforced the European Central Bank's cautiously optimistic view of the region's economy, although this failed to boost stocks.
Investors were sceptical Washington will gain support in trying to get countries to stop weakening their currencies for economic gain, and many in the market anticipated a statement from the meeting lacking any punch would keep the dollar weak.
"Markets are really struggling to see what's going to come out of the G20 meeting," said Simon Smith economist at FXPro.
"(U.S. Treasury Secretary Timothy) Geithner has his idea about putting something in practice about currency rates reflecting fundamentals ... but we've heard this all before." Group of 20 finance and central bank chiefs meet on Friday and Saturday in Gyeongju, South Korea, seeking agreement on a common path to manage currency, trade and macroeconomic imbalances ahead of a leadership meeting in Seoul next month.
A draft communique called for countries to avoid economic imbalances and excessive state interference in currency markets, Russia's deputy finance minister told Reuters.. No numeric targets for current accounts were mentioned.
Developing economies such as China may be cool to the idea of letting their currencies fly when the Fed is discussing a new round of quantitative easing, an issue which has spread tension across markets over a potential currency war.
For financial markets, at stake in the G20 meeting is whether to keep alive what has been a dominant trade since September of selling dollars to buy emerging market equities, commodities and longer maturity bonds.
The dollar has taken a beating in the past month on swirling speculation the Fed will launch another round of pumping cash into markets to help stimulate the U.S. economic recovery, which would likely push the dollar even lower.
By 1055 GMT, the dollar was up slightly on the day against a currency basket at 77.482, while the euro slipped a touch to $1.3912.
The dollar is poised to end the week slightly higher after suffering a deep sell-off in the past month or so, as investors trim back short positions which have been piling up since speculation of more Fed easing has picked up.
Investors also took profits on their bets on emerging Asian currencies, particularly after China's interest rate rise on Tuesday sparked concerns about the impact on domestic growth.
The FTSEurofirst 300 index slipped 0.1 percent as G20-related caution prompted investors to trim long equity positions after the index hit a six-month high on Thursday.
"Traders are likely to clear their books (ahead of the weekend), especially with the G20 meeting going on," said Heino Ruland, strategist at Ruland Research in Frankfurt.
Still, losses were limited in market participants expected stocks to remain supported given a strong run of European and U.S. earnings, which suggest the global economy is recovering.
Limiting losses were higher-than-expected profits at Ericsson, the world's biggest mobile network gear maker.
The MSCI world equity index slipped 0.3 percent, but hovered in range of a roughly two-year high hit earlier in the month.
World stocks have been boosted by a rise in emerging market currencies, as capital flows into these high-growth regions have cranked up on growing expectations the Fed will have to print dollars to buy more assets and pull down market rates.
Global emerging market equity funds absorbed a net $3.76 billion in new money while emerging market bond funds took in more than $1 billion in the week ended Oct 20, fund tracker EPFR Global said in a note.
With more than two months to go until the end of the year, inflows to emerging markets have already exceeded 2009.
The German Ifo business sentiment index hit its highest in 3 1/2 years on Friday, helping to push the yield on two-year German government bonds rose almost a basis point higher to 1.010 percent.
Oil investors cheered the data, which showed the German economy remains buoyant pushing U.S. crude oil prices up 0.7 percent on the day to $81.10, although support for the dollar prodded gold prices to a two-week low.
(Additional reporting by Joanne Frearson; Editing by Toby Chopra)