* Dollar/yen recovers from 16-month low set last week
* Dollar supported vs yen as trade war fears ease
* Euro steadies, draws support from German coalition deal
By Masayuki Kitano
SINGAPORE, March 6 (Reuters) - The dollar edged higher versus the yen on Tuesday, supported by receding fears about a trade war stemming from U.S. President Donald Trump’s proposed tariffs on imported steel and aluminium.
The dollar had tumbled to 16-month lows against the safe-haven yen late last week as concerns about a trade war gripped markets after Trump announced his plan for steel and aluminium tariffs.
Jitters have eased this week, however, as pressure to back off from plans to implement new tariffs grew and as market participants came to view Trump’s proposed tariffs more as a negotiating tactic than a hard policy proposal.
The dollar edged up 0.1 percent to 106.30 yen, continuing a recovery from the greenback’s 16-month low of 105.24 yen set on Friday.
“There is some relief and a shift to some risk-taking,” said Teppei Ino, an analyst for Bank of Tokyo-Mitsubishi UFJ in Singapore.
On technical charts, however, the dollar still seems to be stuck in a downtrend against the yen, Ino said. In the near-term, any gains in the dollar will probably be capped at levels around its Feb. 21 high of 107.905 yen, he added.
The dollar had wobbled last week on Trump’s proposed 25-percent and 10-percent levies on imported steel and aluminium.
The surprise announcement touched off threats of countermeasures from the European Union, Canada and other U.S. trade partners.
However, senior lawmakers from Trump’s Republican Party have urged Trump to reconsider imposing the tariffs, raising questions about whether they will be implemented at all.
U.S. House Speaker Paul Ryan on Monday urged the Trump administration not to move forward on new tariffs on steel and aluminium announced last week, citing the risks to the economy.
The Canadian dollar nursed its losses, having set an eight-month low on Monday after Trump used proposed tariffs on steel and aluminium as a bargaining chip in talks to revamp NAFTA.
The Canadian dollar last stood at C$1.2967 per U.S. dollar. On Monday, the Canadian dollar had set a low of C$1.3002, its weakest level since July last year.
Trump said on Monday that Canada and Mexico could avoid being caught in his planned hefty tariffs on steel and aluminium imports if they ceded ground to Washington in trilateral talks on a new North American trade deal.
The euro edged up 0.2 percent to $1.2354, having recovered from a brief selloff on Monday tied to Italy’s inconclusive weekend election, as it drew support from the creation of a coalition government in Germany that eased political uncertainty there.
The negative impact on markets from Italy’s election results, in which right-wing and eurosceptic parties polled better than expected, was somewhat offset by Germany’s Social Democrats agreeing to join Chancellor Angela Merkel’s conservatives, ending a period of uncertainty in Europe’s biggest economy. (Reporting by Masayuki Kitano in SINGAPORE; Editing by Sam Holmes)