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US dollar holds firm amid trade tensions with EU

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Euro on defensive after sliding further from 5-month peak

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Yen softens as market weighs BOJ rate hike timing

(Updates for Asia afternoon)

By Brigid Riley

TOKYO, March 14 (Reuters) - The U.S. dollar was broadly

firmer on Friday with the euro pulling further away from a

five-month peak as markets grappled with escalating global trade

tensions and risks of a sharp economic downturn.

Elsewhere, the yen gave up more of its recent gains as

markets backed off a small chance of the Bank of Japan (BOJ)

raising interest rates in May.

Sowing more volatility across markets, U.S. President Donald

Trump threatened to hit imports of wine, cognac and other

alcohol from Europe with a 200% tariff.

The escalating tensions between the traditional allies came

after the EU bloc announced plans to impose levies on American

whiskey and other products next month, itself a response to U.S.

tariffs on steel and aluminium imports.

The euro edged down to $1.0846 after sliding

further off Tuesday's five-month peak the previous day as the

EU-U.S. trade spat rattled markets and Germany struggled to pass

a massive spending proposal.

Hopes of an imminent ceasefire between Ukraine and Russia

were also fading as Moscow said it supported the U.S. proposal

but suggested it would need some serious reworking.

The softer euro helped lift the dollar index, which

measures the greenback against a basket of currencies, further

away from Tuesday's trough of 103.21, its lowest since

mid-October.

The dollar index last rose 0.12% to 103.95, on track for a

third straight days of gains, though concerns simmered about the

outlook for the U.S. and broader global economy.

"I think the million-dollar question with whatever asset

class you're looking at is ... where do we start to find the

news that's going to turn around risk sentiment? And at this

point in time, it's not clear," said Tony Sycamore, a market

analyst at IG.

Since climbing to a six-month peak back in January, the

dollar has fallen more than 5% as the U.S. exceptionalism

narrative started to fray, with the S&P 500 tumbling into

correction territory on Thursday.

A potential U.S. government shutdown added to uncertainties,

although top U.S. Senate Democrat Chuck Schumer on Thursday said

he would vote to advance a Republican stopgap funding bill,

signalling that his party would provide the votes to avert a

shutdown.

WAGE RESULTS AWAITED

The yen walked back some of its gains on Friday, after

strengthening to as high as 146.545 per dollar earlier this week

on safe-haven bids and market bets for further rate hikes in

Japan.

But a report by local media on Thursday that suggested the

BOJ is in no rush to raise rates in May, as a portion of market

players had been betting, weighed on the currency, said Nomura

Securities currency strategist Jin Moteki.

Meanwhile, first-round results of Japan's spring wage

negotiations are due later in the day. The negotiations are

expected to result in wage increases of around 5.3%, in line

with market expectations and BOJ forecasts, Moteki said.

"I think that it will support the BOJ over the medium term,

but it cannot be the reason to raise (rates) at its May

meeting," he said.

Economists and markets see the central bank standing pat at

its meeting next week as policymakers gauge global risks.

The dollar last traded up 0.48% at 148.51 yen.

Sterling drifted around $1.2946 ahead of the

release of gross domestic product figures for January, after

falling in the previous session from Wednesday's four-month high

of $1.2990.

The Canadian dollar wallowed at 1.4429 per U.S.

dollar, with Canada caught in the tariff crossfire.

The Australian dollar fetched $0.6296, up 0.2%

after slipping on Thursday, while the New Zealand dollar

rose 0.3% to $0.57135.

In cryptocurrencies, bitcoin was up about 2% at

$82,016.70.