*

Dollar hovers above near 3-week low as U.S. PPI report

eases

inflation concerns

*

Perceived room for tariff negotiations soothes trade war

anxieties

(Updates with European prices)

By Brigid Riley and Amanda Cooper

TOKYO/LONDON, Feb 14 (Reuters) - The U.S. dollar

stabilised around a near three-week trough on Friday as traders

took solace that Washington's reciprocal tariffs were not

immediately imposed, while a U.S. producer price report soothed

inflation concerns.

U.S. President Donald Trump directed his economic team on

Thursday to formulate plans for reciprocal tariffs on every

country that imposes taxes on U.S. imports.

But he stopped short of quickly unveiling another round of

tariffs, instead kicking off what could be weeks or months of

investigation into other countries' levies imposed on U.S.

goods.

That buoyed expectations that there may yet be room for

target countries to negotiate, which helped shore up sentiment.

The dollar rallied 7% against a basket of currencies last

year, as investors prepared for Trump's tariffs that threatened

to fire up inflation, among other things.

Since taking office on January 20, Trump has announced

tariffs on Mexico, Canada and China, but has these have been

either delayed or watered down, which has dented the dollar.

The euro and the pound, which are in

the firing line for reciprocal tariffs, have risen 2% and 3%,

respectively, since Trump's inauguration.

"The lack of concern about the latest tariffs from

Trump, suggests that the FX market continues to think that

President Trump is posturing, and will tone down the tariffs at

the last minute," XTB research director Kathleen Brooks said.

Some traders expect tariffs to benefit the dollar, but the

delayed timeline of the newest announcements did little to lift

the greenback off its weakest since late January following

Thursday's wholesale inflation data.

The euro edged up to its highest in over two weeks against

the dollar at $1.04823, supported by optimism around potential

peace talks between Ukraine and Russia.

On Wednesday, Trump discussed the war in Ukraine in phone

calls with Russian President Vladimir Putin and Ukrainian

President Volodymyr Zelenskiy.

He said on Thursday that Ukraine would have a seat at the

table during any peace negotiations with Russia.

Sterling, meanwhile, rose 0.18% on the day to

$1.2591, its strongest since early January, after data earlier

this week soothed some concern about the resilience of the UK

economy.

SOFTENED INFLATION FEARS

Thursday's U.S. producer price index, which measures

inflation at the farm and factory gate, showed some abatement in

price pressures, particularly from a decline in energy costs.

That helped repair some of the blow to confidence from

this week's hotter-than-expected consumer prices report, which

prompted traders to rule out much more than one rate cut this

year from the Federal Reserve.

Futures traders have about 33 basis points of cuts priced in

for this year. That is up from 29 basis points before Thursday's

data, but down from 37 basis points before the CPI data was

released on Wednesday.

Uncertainty remains about the outlook for the U.S. economy,

with questions about the way Trump administration policies will

play out chief among them.

"We expect the Fed to remain cautious amid concerns about

the stalled disinflation process and President Trump's tariff

increases," said Carol Kong, a currency strategist at

Commonwealth Bank of Australia.

U.S. retail sales figures for January are due later in

the day.

U.S. Treasury yields declined as investors took comfort in

the PPI numbers, helping the yen to claw back most of its losses

after weakening to 154.80 on Wednesday.

The Japanese currency was steady at 152.775,

having gained nearly 3% so far in 2025, as investors ramp up

bets on the Bank of Japan raising rates again this year.

(Additional reporting by Brigid Riley in Tokyo; Editing by

Jacqueline Wong, Sonali Paul and Kim Coghill)