HONG KONG, March 24 (Reuters) - The dollar nursed steep losses against major currencies on Tuesday in a wild start to the week after U.S. President Donald Trump delayed the bombing of Iran's power grid, a move that allayed fear of a prolonged war in the Middle East.

Trump wrote on his Truth Social platform that the U.S. and Iran had held "very good and productive" conversations about a "complete and total resolution of hostilities in the Middle East". Iran denied it had engaged in any direct negotiations.

The contrasting comments left markets on edge after a risk-on rally immediately after Trump's post in which he postponed the bombing for five days. Still, markets were mindful of the war all but halting shipments of about one-fifth of the world's oil and liquefied natural gas through the Strait of Hormuz.

Sterling eased 0.5% to $1.33925 after jumping nearly 1% on Monday, while the euro was down 0.2% at $1.1593 after gaining 0.4% in the previous trading session.

The dollar index, which measures the U.S. currency against a basket of peers, rose nearly 0.2% to 99.35 after dipping to near a two-week low on Monday.

"The news overnight is giving a breather to volatility at least, but it's difficult to see that this is going to trigger a risk-on trend," said Rodrigo Catril, ‌a currency strategist at National Australia Bank.

However, Trump's policy track record was keeping markets wary, with traders uncertain whether this marked the start of genuine negotiations or simply a retreat from volatility-inducing threats, he said.

The Australian dollar fell 0.2% to $0.6993 in early trade, pulling back from a six-week high. The New Zealand dollar was down 0.23% at $0.5845.

Oil prices edged higher after plunging more than 10% on Monday, with Brent crude futures retopping $100.94 a barrel as supply fear keeps sentiment cautious.

"The key question is whether participants see this as a genuine extension that brings a deal closer, or simply a delay that prolongs uncertainty," said Chris Weston, head of research at Pepperstone.

"The U.S. dollar has seen selling on the back of the move lower in crude and the broader repositioning in risk. However, there is little conviction in the move, and conditions remain ripe for sharp reversals."

The yen was steady at 158.61 a dollar after Japan's core consumer inflation rate hit 1.6% in February. That was below the Bank of Japan's 2% target for the first time in nearly four years, complicating the bank's efforts to justify further interest rate hikes.