* Dollar and yen face pressure as investors embrace risk

* Kiwi dollar rises following inflation reading

* Investors closely watch U.S.-Iran talks

By Jiaxing Li

HONG KONG, April 21 (Reuters) - The dollar and yen were

under pressure on Tuesday, with investors poised to buy riskier

currencies and hoping for a U.S.-Iran deal to reopen Gulf

shipping, while a sticky inflation reading lifted the New

Zealand dollar.

With the ceasefire set to expire this week, the fate of Iran

peace talks remained uncertain as Tehran has yet to decide how

to proceed with the diplomatic process following a recent

escalation in tensions.

However, investors think both sides are motivated to reach a

deal. President Donald Trump said negotiations are happening

"relatively quickly" and will yield better terms than previous

agreements.

The euro stood at $1.1782 and sterling traded at

$1.35225, both down roughly 0.1% so far on the day. The

risk-sensitive Australian dollar weakened 0.1% to

$0.7171 in early trading.

The dollar index, which measures the greenback

against a basket of currencies including the yen and the euro,

was steady at 98.087 after a 0.2% decline on Monday.

"I think the talks between those two parties will be the key

driver in the next 24 hours," said Carol Kong, currency

strategist at the ‌Commonwealth Bank of Australia. "Markets are

just in a wait-and-see mode."

Trump appears eager to reach a deal with Iran and end the

war quickly, but it's very much dependent on the outcome of the

negotiations, she added.

"We still see two-sided risks to the U.S. dollar."

CENTRAL BANK MOVES WATCHED

The yen was steady at 158.955 per dollar, continuing

to hover near the crucial 160 level that traders see as the line

in the sand for intervention.

The Bank of Japan is likely to hold off raising interest

rates next week, five sources familiar with its thinking said,

as fading prospects of a near-term end to the Middle East war

keep the country's economic and price outlook uncertain.

The kiwi traded at $0.59085, up 0.3%. New Zealand's

annual inflation rate was unchanged at 3.1% in the first

quarter, above the central bank's target range, increasing the

likelihood of further rate hikes this year.

Meanwhile in the U.S., Kevin Warsh, Trump's nominee to lead

the Federal Reserve, will tell lawmakers at his Senate

confirmation hearing on Tuesday that he is "committed to

ensuring that the conduct of monetary policy remains strictly

independent."

Attention will be paid to U.S. retail sales for

March later today, with analysts predicting a chunky 1.4%

increase.