* 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 held steady versus the yen on Tuesday, supported by receding fears about a trade war stemming from U.S. President Donald Trump's proposed tariffson imported steel and aluminium.
The dollar had tumbled to 16-month lows against thesafe-haven yen late last week as concerns about a trade wargripped markets after Trump announced his plan for steel andaluminium tariffs.
Jitters have eased this week, however, as pressure to backoff from plans to implement new tariffs grew and as marketparticipants came to view Trump's proposed tariffs more as anegotiating tactic than a hard policy proposal. is some relief and a shift to some risk-taking," saidTeppei Ino, an analyst for Bank of Tokyo-Mitsubishi UFJ inSingapore.
The dollar's bounce against the yen, however, was still toomoderate to suggest that a downtrend seen over the past coupleof months had come to an end, Ino said.
The dollar held steady on the day at 106.22 yen JPY= . OnMonday, it had gained 0.4 percent, edging away from thegreenback's 16-month low of 105.24 yen set on Friday.
The yen showed limited reaction after Bank of Japan GovernorHaruhiko Kuroda said on Tuesday there were downside risks to thecentral bank's projection that inflation would reach its 2percent target around the fiscal year ending in March 2020. regarding when the BOJ, which has significantlylagged its peers in moving towards policy normalisation, wouldexplore an exit from its easy policy has been one of the keythemes impacting the yen in the past few months.
The yen had risen last week after Kuroda on Friday flaggedfor the first time the prospect of an exit from accommodativepolicy if his inflation target was met. are now waiting for further news regarding thetariffs proposed by Trump, said Heng Koon How, head of marketsstrategy for United Overseas Bank in Singapore.
"There's a slight relief rally in the equities market andrisk appetite. Going forward we have to assess the riskaccordingly, depending on how the news flow is," Heng said.
The Canadian dollar nursed its losses, having set aneight-month low on Monday after Trump used proposed tariffs onsteel and aluminium as a bargaining chip in talks to revampNAFTA. Canadian dollar last stood at C$1.2980 per U.S. dollar.On Monday, the Canadian dollar had set a low of C$1.3002, itsweakest since July last year.
The euro edged up 0.1 percent to $1.2347 EUR= , havingrecovered from a brief selloff on Monday tied to Italy'sinconclusive weekend election.
Two anti-establishment leaders made early plays to governItaly on Monday, following an inconclusive election where votersshunted mainstream parties to the sidelines. negative impact on markets from Italy's electionresults, was somewhat offset by Germany's Social Democratsagreeing to join Chancellor Angela Merkel's conservatives,ending a period of uncertainty in Europe's biggest economy.
The Australian dollar edged up 0.1 percent to $0.7770 AUD=D3 . There was little reaction to the Reserve Bank ofAustralia's (RBA) widely expected decision to keep interestrates steady at 1.5 percent, but there were concerns that theAussie could come under pressure as the RBA sounded a cautionarynote on growth.