* Trump postpones strikes on Iran power grid for five

days

* Markets cautious with Iran denying US negotiations took

place

* Low conviction trading raises reversal risk

By Jiaxing Li

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 Trumpdelayed 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.