* Softer US PPI adds to evidence of cooling inflation to

weigh on dollar

* Traders expect Fed to skip July rate hike

* Oil near one-month high on Strait of Hormuz blockade, US

strikes

(Recasts lede; updates prices throughout, analyst comments,

byline; adds NEW YORK dateline)

By Laura Matthews and Samuel Indyk

NEW YORK/LONDON, July 15 (Reuters) - The dollar slipped

against major currencies on Wednesday after softer-than-expected

U.S. producer prices reinforced signs of easing inflation,

bolstering the view that the Federal Reserve can remain patient

on interest rates even as investors weighed renewed strikes on

Iran.

The Producer Price Index for final demand dropped 0.3% in June

after a downwardly revised 0.6% increase in May, the Bureau of

Labor Statistics said on Wednesday. Economists polled by Reuters

had forecast the PPI unchanged after a previously reported 1.1%

advance in May.

The dollar was flat against the yen at 162.19 yen. The

euro steadied at $1.1433, while sterling rose

0.44% to $1.3447.

The U.S. dollar index, which tracks the currency against

six major peers, softened 0.09% to 100.79. It fell 0.4% in the

previous session, its biggest decline in nearly two weeks, after

touching its highest level since July 2.

"Today's PPI numbers further solidify the idea that the Federal

Reserve can afford to wait until they increase borrowing costs

again," said Juan Perez, director of trading at Monex USA.

Meanwhile, New York Fed President John Williams said inflation

remains "unquestionably too high" but may have peaked and should

begin easing, adding that monetary policy is well positioned to

guide it back to target.

EYES ON THE MIDDLE EAST

The latest escalation in hostilities between the U.S. and Iran

kept oil prices near one-month highs, maintaining pressure on

the inflation outlook.

The U.S. military said it had begun a new wave of strikes on

Iran at 6 a.m. ET (1000 GMT) on Wednesday, after U.S. President

Donald Trump said on Tuesday that Washington had reimposed a

naval blockade of all Iranian ports.

The dollar has tended to benefit during flare-ups in the

conflict because of its safe-haven status and the relatively

limited impact of higher energy prices on the U.S. economy

compared with some peers.

Cooler U.S. inflation had earlier weighed on the dollar. U.S.

consumer inflation slowed more than expected to 3.5% on a

year-on-year basis in June, data showed on Tuesday.

The headline consumer price index fell 0.4% month-on-month,

its first decline since April 2020, as energy prices retreated.

"The recent declines in CPI and PPI have largely been

attributed to energy price volatility following the pullback

after the Iran ceasefire," said Steve Kolano, chief investment

officer at Integrated Partners. "However, given recent events,

that trend is expected to reverse."

New Fed Chair Kevin Warsh told the House Financial Services

Committee on Tuesday that the central bank has "no tolerance"

for persistently elevated inflation, and pledged to "do my job"

if challenged by Trump.

Traders are now pricing in about a 74% chance of a December rate

hike, down from around 80% yesterday, while a move later this

month is seen as highly unlikely, according to LSEG data.

Elsewhere, China's economic growth slowed sharply to 4.3% in

the second quarter, its weakest pace in more than three years.

The yuan briefly firmed to a one-month high as the

data reinforced expectations of further policy support.

"I see limited follow-through to the dollar's post-CPI decline,"

said Elias Haddad, global head of markets strategy at Brown

Brothers Harriman in London, adding that U.S. economic

outperformance, the Fed's commitment to fight inflation and

strong foreign demand for U.S. assets should keep the greenback

supported.