* 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 higherversus the yen on Tuesday, supported by receding fears about atrade war stemming from U.S. President Donald Trump's proposedtariffs on 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.
The dollar edged up 0.1 percent to 106.30 yen JPY= ,continuing a recovery from the greenback's 16-month low of105.24 yen set on Friday.
"There is some relief and a shift to some risk-taking," saidTeppei Ino, an analyst for Bank of Tokyo-Mitsubishi UFJ inSingapore.
On technical charts, however, the dollar still seems to bestuck in a downtrend against the yen, Ino said. In thenear-term, any gains in the dollar will probably be capped atlevels around its Feb. 21 high of 107.905 yen, he added.
The dollar had wobbled last week on Trump's proposed25-percent and 10-percent levies on imported steel andaluminium.
The surprise announcement touched off threats ofcountermeasures 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, raisingquestions about whether they will be implemented at all.
U.S. House Speaker Paul Ryan on Monday urged the Trumpadministration not to move forward on new tariffs on steel andaluminium announced last week, citing the risks to the economy. 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$1.2967 per U.S. dollar.On Monday, the Canadian dollar had set a low of C$1.3002, itsweakest level since July last year.
Trump said on Monday that Canada and Mexico could avoidbeing caught in his planned hefty tariffs on steel and aluminiumimports if they ceded ground to Washington in trilateral talkson a new North American trade deal. euro edged up 0.2 percent to $1.2354 EUR= , havingrecovered from a brief selloff on Monday tied to Italy'sinconclusive weekend election, as it drew support from thecreation of a coalition government in Germany that easedpolitical uncertainty there.
The negative impact on markets from Italy's electionresults, in which right-wing and eurosceptic parties polledbetter than expected, was somewhat offset by Germany's SocialDemocrats agreeing to join Chancellor Angela Merkel'sconservatives, ending a period of uncertainty in Europe'sbiggest economy.