(Updates to late morning U.S. trading)

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Wall Street stocks edge up, dollar down

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Rising Middle East tension dents sentiment, gold up

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Markets give lukewarm reception to U.S.-China truce

agreement

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Trump's latest tariff salvo unnerves investors

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Soft U.S. CPI sets stage for Fed meeting next week

By Lawrence Delevingne and Amanda Cooper

June 12 (Reuters) - The dollar hit a 2025 low on

Thursday but Wall Street stocks held near record highs as

traders weighed low inflation readings, rising Middle East

tensions, and the fragility of a trade truce between Washington

and Beijing.

Reports on U.S. consumer and producer inflation showed

overall price pressures remained contained in May, largely due

to declines in the cost of gasoline, cars and housing, or

services like airfares. But most economists expect inflation to

pick up as the impact of U.S. tariffs begins to bite.

The dollar, which has lost around 10% in value against a

basket of currencies this year, fell to its lowest since April

2022 in early trading.

Global stocks continued an almost-unbroken rally that has run

since early April, leaving the MSCI All-Country World index

up 0.3%, just below Wednesday's all-time high.

On Wall Street, the Dow Jones Industrial Average was

little changed, while the S&P 500 and the Nasdaq

Composite both gained about 0.3%.

Shares of planemaker Boeing lost about 5% after an Air

India aircraft carrying more than 200 people crashed in India's

western city of Ahmedabad, and aviation tracking site

Flightradar24 said the plane was a Boeing 787-8 Dreamliner.

Oracle shares rose 13% after the cloud service provider

raised its annual revenue growth forecast.

In Europe, the STOXX 600 fell 0.2%, led mostly by

airlines, given brewing tensions in the Middle East.

The U.S. administration on Wednesday said U.S. personnel were

being moved out of the Middle East due to heightened security

risks in the region, which briefly drove oil prices up by 4%

before they receded.

"(A flare-up in tensions) is a significant tail risk, but I

don't think it is anybody's baseline forecast. So it's something

to watch if there is a real escalation there, then markets will

take fright and that would have ramifications for the oil

price," Daiwa Capital economist Chris Scicluna said.

Iran said it will not abandon its right to uranium enrichment, a

senior Iranian official told Reuters on Thursday, adding that a

"friendly" regional country had alerted Tehran over a potential

military strike by Israel.

Classic safe-haven assets got a lift. The Swiss franc

and the Japanese yen strengthened, pushing the dollar

down by 0.9% against the franc and down 0.5% against the yen,

while gold rose about 1% to $3,384 an ounce.

The sense of relief stemming from a positive conclusion to

U.S.-China trade talks earlier this week, which President Donald

Trump said was a "great deal with China," evaporated by

Thursday.

RED, WHITE AND BLUE LETTERS

Adding yet another dose of uncertainty to the markets, Trump

said the U.S. would send out letters in one to two weeks

outlining the terms of trade deals to dozens of other countries,

which they could embrace or reject.

"Markets may have no choice but to respond to Trump's tariff

threat - even if it's just posturing to bring others to the

table. The gap between 'risk-on' positioning and real-world

risks has stretched too far," said Charu Chanana, chief

investment strategist at Saxo Bank.

Trump's erratic tariff policies have roiled global markets

this year, prompting hordes of investors to exit U.S. assets,

especially the dollar, as they worried about rising prices and

slowing economic growth.

The euro rose by as much as 1% to $1.16, its

highest since October 2021.

U.S. Treasuries also rallied in price, pushing

yields down 3.1 basis points to below 4.383%, while two-year

yields, which are more sensitive to inflation and

interest-rate expectations, eased 3.3 bps to 3.912%.

Wednesday's consumer inflation index kept alive the prospect

of the Federal Reserve cutting rates by a quarter point, but

only in September, as policymakers assess how tariffs work their

way through the real economy.

On Thursday, a report from the Labor Department showed that U.S.

producer prices, known as PPI, increased less than expected in

May, restrained by lower costs for services like air fares.

Chris Zaccarelli, chief investment officer for Northlight

Asset Management in Charlotte, said the new inflation data this

week gives the Fed cover to wait for more information on how the

new tariffs and trade negotiations might impact price

stability.

"This gives the Fed room to sit on their hands," he wrote in

an email.

Oil, which has fallen by 20% in the last year, eased by

0.85% to $69.18 a barrel, but was still pinned near two-month

highs, adding another moving part to the outlook for interest

rates.