* Yen rallies, pushes through 90 yen per dollar
* Euro rises on strong U.S. consumer sentiment report
* Sterling takes a hit, falls to 4-mth low vs dollar (Updates prices, adds detail, comment, changes byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Sept 25 (Reuters) - The U.S. dollar sank to its lowest in more than seven months against the yen on Friday, weighed down by comments overnight from Japan's Finance Minister Hirohisa Fujii saying he was against deliberately weakening the yen or any other currency.
Traders cited a Kyodo News report saying Fujii told U.S. Treasury Secretary Timothy Geithner in a meeting on Thursday evening he was opposed to manipulating the value of the yen.
In the past, Japan has intervened in the currency market to weaken the yen as this helped keep its competitive advantage in global trade..
"People are now not afraid to sell dollar/yen below any critical level after Fujii's made those comments overnight since there is no longer any fear of central bank activity," said Matt Kassel, director of foreign exchange at ING Capital Markets in New York.
Fujii was in Pittsburgh this week for a meeting of Group of 20 developed and emerging market countries. A draft G20 statement leaked to the press late on Thursday said global stimulus measures will stay in place, suggesting interest rates will remains low.
That also pressured the U.S. currency because with near zero interest rates, investors would have less reason to hold dollar-denominated assets.
But it was Fujii's comments that traders talked about on Friday, practically giving them the license to sell the dollar against the yen as the greenback fell as low as 89.52 yen, the lowest since mid-February.
"I think this year dollar/yen can probably fall somewhere between 84-85 yen," Kassel said. However, he was not ruling out Japanese intervention entirely, but he believed the government won't intervene until the currency pair drops below 78 yen.
The record low back in 1995 was 79.70 yen, according to Reuters data. "I think you need to see a push below that to justify a disorderly type move that deviates from fundamentals," Kassel said.
In early afternoon trading, the dollar was last down 1.7 percent at 89.76 yen. The euro also fell 1.6 percent to 131.64 yen.
Analysts said investors repatriating funds before Japan's fiscal year hits the halfway mark on Sept. 30 also lifted the yen.
The euro edged higher against the greenback, helped by encouraging data showing U.S. consumer sentiment hit its highest level this month since January 2008.
The euro has been viewed as one of the proxy currencies for risk appetite, moving in tandem with positive economic data and higher stocks.
The euro rose 0.1 percent to $1.4667. A separate report showing U.S. new homes sales edged up in August also boosted the euro zone's single currency.
The dollar fared better against sterling, which fell to multi-month lows a day after Bank of England Governor Mervyn King said a weak pound would help exports and the UK economy.
The pound fell to $1.5919, its lowest since early June, before edging back to $1.5950, down 0.7 percent, while the euro rose above 92 pence for the first time since April.
King's comments hit the UK currency, as did perceptions that the Bank of England will lag other central banks in ending its loose monetary policy.
Meanwhile, comments by Federal Reserve Governor Kevin Warsh on Friday said U.S. interest rates could go higher sooner than most people expect, partly easing the negative stance on the dollar.
(Additional reporting by Steven C. Johnson; Editing by Andrew Hay)
(Reporting by Gertrude Chavez-Dreyfuss; Editing by XXXXX)