WASHINGTON (MarketWatch) -- The warning that Group of Seven finance officials sent to foreign-exchange markets -- that it's unhappy with all the recent volatility -- is a signal they want to give the dollar a breather after its pummeling by currency traders, experts said Sunday.

But Treasury Secretary Henry Paulson, Federal Reserve chairman Ben Bernanke and their counterparts from the G7 also conveyed a second signal this weekend, analysts said. Namely, don't expect central banks to buy up dollars in the open market.

Instead, they hope that their jawboning can stabilize the market. They believe, with a little time and luck, events might begin to turn in the dollar's favor.

"It looks as though the G7 is trying to buy the beleaguered dollar some time, as it trades just off its all-time low versus the euro," said Ronald Simpson, foreign-exchange analyst at Action Economics.

"They are hoping that the economy will turn around, that credit markets will stabilize to a degree and perhaps we will start to see a bottom in the U.S. housing market," Simpson said.

In a very unusual move, the G7 nations said in a statement Friday: "Since our last meeting, there have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability." See related story.

Although the statement didn't specifically mention the greenback, it was clear that the G7 was saying they are not happy with the dollar's weakness.

“ 'The G7 will see what the market reaction is. If it stabilizes the dollar, they won't have to do anything more. If that doesn't work, they'll go to the next step.' ” — Desmond Lachman, American Enterprise Institute

"It is trying to signal that the dollar is falling too quickly and that this is causing problems" throughout the global financial market, said Desmond Lachman, analyst at the American Enterprise Institute, a Washington think tank.

Lex Rieffel, a former U.S. Treasury official and now a scholar at the Brookings Institution, said he believed that the Europeans pressed for the new language.

"I have to believe it was the Europeans who said, 'Look, we've got to make it clearer to markets that we are not pleased with the weakness of the dollar,' " Reiffel said.

Stability's the objective

The goal isn't necessarily to turn the dollar around in the wake of its dramatic recent weakness.

"I don't think we've reached that point where intervention is necessary. They are trying to stabilize" the U.S. currency, Reiffel said.

"Officials are trying to play for time," said Marc Chandler, head of currency strategy with Brown Brothers Harriman & Co.

It's widely anticipated that the Fed is going to again cut interest rates when the U.S. central bank meets later this month, but the European Central Bank has given no hints that it's to do anything but hold firm against easing euro-zone monetary policy, preferring instead to exercise vigilance against inflation.

But this might change by September, analysts said. The Fed isn't going to keep easing forever, and analysts see the ECB coming around to the idea of cutting rates later this year.

If Bernanke and other Washington policymakers are correct that the U.S. economy can rebound in the second half of 2008, this will also help the dollar.

While the Europeans had a clear interest in seeing a weaker dollar, it was surprising to some that the U.S. would agree to the language change.

After all, the U.S. with its soft economy is benefiting from a weak dollar. Manufacturers are able to export more goods and compete on a better footing in global markets.

Sobering side effects

What brought Paulson to the negotiating table, experts said, is concern that these benefits are being outweighed by two negative factors of a weak dollar: high oil prices and the risk that foreigners will pull out of dollar investments.

The market has linked the falling dollar to higher oil prices. And if oil remains at these high levels, it will offset any gains from the economic stimulus package that will start to impact the economy next month, Lachman said.

And the fear that foreigners might divest their holdings of U.S. Treasurys has been a long-standing concern.

"The fear is that if the U.S. is paying very low interest rates and the dollar keeps declining, why these foreigners are holding all these bonds. If they begin off-loading these bonds, it becomes a financial market problem," Lachman said.

What will happen Monday?

Chandler downplayed suggestions that the G7 is close to intervening in the currency markets.

He said he viewed intervention as a ladder, and while the statement does move finance officials up a few rungs, they are still well below the intervention step.

Lachman agreed.

"The G7 will see what the market reaction is. If it stabilizes the dollar, they won't have to do anything more. If that doesn't work, they'll go to the next step," he said.

A few analysts were dismissive of the language change, however.

"It is a green light to continue selling U.S. dollars. It is most likely what we're going to see on Monday and Tuesday," said Michael Woolfolk, senior currency strategist at the Bank of New York Mellon.

"It was a very bland statement," he said.

Ashraf Laidi, chief foreign-exchange strategist at CMC Markets U.S., said nothing short of intervention would stop the dollar weakness.

But Kathy Lien, chief strategist at Forex Capital Markets, raised the possibility that behind the scenes, "something very big" might be in the works at the G7.

She said she 's been advising traders to be ready for some creative action that might be aimed at overall market liquidity.

As such, she sees the G7 statement as supporting the dollar.