But they have been careful to not push their desire for change too far - in case the us dollar slumps and the value of their large dollar-denominated investments plummet.

The issue is expected, however, to be on the agenda in some form at the Group of Eight (G8) meeting which starts today in L'Alquila, Italy.

"The bottom line is that a weaker dollar is in nobody's interest," said Neil Mackinnon, chief economist at ECU Group, a currency hedge fund management firm in London.

Short-term result

The short-term result may be statements to support the dollar, while developing countries think long-term about ways to diversify their holdings away from it. China and the biggest developing countries have limited participation at the G8, which are Britain, Canada, France, Germany, Italy, Japan, Russia, and the US.

A sliding dollar would have massive repercussions for the world economy as it looks to emerge from one of the most savage recessions in generations, which has seen global trade collapse by up to 20 per cent.

It would be bad for global growth as it introduces uncertainty into the financial markets as well as reining in the purchasing power of US consumers, given that a weaker dollar increases the value of imported goods. It would also raise the value of commodity prices, such as oil, that are priced in dollars, and make it far more difficult for the US to fund its deficits as investors would be wary of buying up US Treasury debt.

Hit big holders

Moreover, a falling dollar would hit big holders of dollars, such as China and Russia. In recent weeks, China, which holds around $2 trillion worth of reserves, mainly in dollars, has been particularly wary of undermining the US currency by any loose talk about diversifying its reserves.

"They have a strong interest in avoiding any action that would undermine the dollar's value," said Stephen Lewis, economist at Monument Securities.

Partly as a result, the dollar has held up well in the foreign exchange markets over the last few weeks, with the euro trading in a narrow range around US$1.40 and the pound dropping back from recent highs.

However, the yen has garnered some support over recent weeks as the stock market rally came to an end - the Japanese currency is widely considered a barometer of risk appetite in the markets in general.

Investors will be particularly interested to see what the world's leaders say about the dollar both in Friday's communique that follows the three-day meeting in L'Alquila and in the ensuing press conferences.

In particular, they will be looking to see whether the language goes beyond the generally banal insistence that G8 leaders want to avoid "excessive volatility" and "disorderly price action."

Thursday could be the most important date for currency markets, as working sessions take place throughout the day between the G8 and several developing countries.

- AP