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Trump's trade war making markets nervous

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New round of reciprocal levies due April 2

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Dollar gains on Japanese yen

(Updates with early European trading)

By Kevin Buckland and Yadarisa Shabong

TOKYO, March 24 (Reuters) - The dollar drifted just

below a three-week high versus major peers on Monday as traders

sought clarity on U.S. President Donald Trump's next round of

tariffs.

U.S. President Donald Trump's administration is likely to

exclude a set of sector-specific tariffs while applying

reciprocal levies on April 2, Bloomberg News and the Wall Street

Journal reported, citing officials.

The U.S. dollar index, which measures the currency

against a basket of six counterparts, was marginally lower at

103.94 as of 0959 GMT, after touching 104.22 on Friday for the

first time since March 7.

"I would imagine that markets will remain anxious and

sensitive to any news that comes out regarding Trump tariffs

ahead of that April 2nd announcement, so I expect some market

jitters certainly this week," said Jane Foley, head of FX

strategy at Rabobank.

The dollar has been under pressure for most of this year

as the market's assumptions that Trump would quickly usher in

pro-growth policies transformed into worries that the

president's aggressive and erratic trade policies could trigger

a recession.

The next round of tariffs is due on April 2, when the White

House will announce reciprocal levies on many countries.

The euro rose 0.25% to $1.0836, recouping some of

its losses of last week and adding to its 4.4% gain on the

dollar so far this month.

Euro zone business activity grew at its fastest pace in

seven months in March, supported by an easing in the

long-running manufacturing downturn despite slower growth in

services, a survey showed.

"Looking at the PMI data that we've seen this morning, a

little bit mixed and so that's not really going to alter the

overall tone of the market still concentrating on those tariff

announcements," Foley said.

The shared currency had been buoyed to the highest since

early October at $1.0955 last week on optimism over Germany's

move to loosen fiscal constraints in order to boost military and

infrastructure spending.

However, the currency slipped back in recent days in the

lead up to the actual ratification of the change, with Germany's

upper house of parliament passing the bill on the so-called debt

brake on Friday.

The Japanese yen edged lower against the greenback,

pressured by a rise in U.S. Treasury yields.

Foley also cited the weakness to the country's finance

minister's warning about deflation in an interview with the

Financial Times, which has created some concern about the pace

of interest rate hikes from the Bank of Japan.

The dollar gained 0.16% to 149.545 yen. The

currency pair tends to track changes in bond yields, and 10-year

Treasury yields added 2.7 basis points to 4.2807% on

Monday.

Sterling gained 0.3% at $1.2956. UK finance

minister Rachel Reeves said on Sunday she would stick to fiscal

rules despite global turmoil, raising the prospect of thousands

of public sector job cuts in this week's budget update which is

likely to include further savings.

The Turkish lira was broadly steady at around 37.91 per

dollar, as a Turkish court on Sunday jailed Istanbul

Mayor Ekrem Imamoglu, President Tayyip Erdogan's main political

rival, pending graft charges, which Imamoglu denies.

The incarceration comes after the main opposition party,

European leaders and hundreds of thousands of protesters

criticised the actions against him as politicised and

undemocratic.

The lira briefly lurched to a record low of 42 per dollar

last week, when Turkey's central bank said it had suspended

one-week repo auctions and hiked its overnight lending rate to

46%, a move that economists say amounts to a tighter policy

stance.