*

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

eases

inflation concerns

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Perceived room for tariff negotiations soothes trade war

anxieties

(Updates for the Asian afternoon)

By Brigid Riley

TOKYO, 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.

In his latest trade salvo, 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 the directive stopped short of piling on fresh tariffs,

instead kicking off what could be weeks or months of

investigation into the levies imposed on U.S. goods.

That buoyed expectations that there may yet be room for

countries to negotiate, cushioning the blow to sentiment.

"Tariff ambiguity still reigns, but markets are

currently drawing some comfort from the news the next set won't

come into effect before April," Ray Attrill, head of FX strategy

at National Australia Bank, wrote in a research note.

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 PPI data.

The euro meandered to its highest in more than two

weeks against the dollar at $1.046925 in Asian trade, 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.

The EU bloc currency was last down 0.1% at $1.0454 ahead of

a second read of fourth quarter GDP and employment data.

Sterling touched $1.2572, its firmest since January

7, and was last trading hands at $1.2552, down 0.13%.

SOFTENED INFLATION FEARS

Thursday's U.S. PPI report eased some concerns about the

stickiness of inflation in the world's largest economy that were

sparked by a hotter-than-expected consumer prices report earlier

this week.

While headline PPI came in above forecasts, a closer

look under the hood suggests core PCE inflation, the Federal

Reserve's preferred measure, is likely to be lower than feared

for January.

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.

Although PPI details were "more favourable," key components

of CPI in January showed strong increases, indicating PCE may

still rise from the previous month at a pace above the Fed's 2%

inflation target, said Carol Kong, a currency strategist at

Commonwealth Bank of Australia.

"We expect the Fed to remain cautious amid concerns about

the stalled disinflation process and President Trump's tariff

increases," she added.

The dollar index, which measures the greenback

against a handful of peers including the euro, was nearly flat

at 107.11 after sliding to 106.99 earlier in the session.

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 up 0.16% at 152.55, but

was on track for its first weekly loss since early January.

The yen has made significant gains since the start of the

year as investors ramped up bets that the Bank of Japan will

continue increasing interest rates.

The Canadian dollar was similarly buoyed by the

fall in U.S. Treasury yields, hovering just below a two-month

high of C$1.4178 hit during Asian trading hours.