FOREX-Dollar stalls trade worries linger in the background

* Dollar dips after loss of risk appetite sinks stocks

* Worst of trade war fears seen to have eased for now

* But market still seen wary of ad hoc risks from headlines

By Shinichi Saoshiro

TOKYO, March 28 (Reuters) - The dollar stalled on Wednesday as lingering global trade tensions curbed its capacity to bounce back from recent lows.

The dollar index, which measures the greenback versus a group of six major currencies, was 0.1 percent lower at 89.291 after gaining about 0.34 percent overnight, when it managed to pull away from a five-week low of 88.942.

The dollar recovered slightly from the five-week low as concerns of a global trade war were eased by optimistic news that the United States and China were set to begin trade negotiations, after earlier exchanging threats.

The U.S. currency was 0.2 percent higher at 105.555 yen .

It had been pushed down from a high near 106.000 reached overnight after a slide in U.S. stocks and Treasury yields, but as fears of a global trade war faded it rebounded from the 16-month low of 104.560 yen set on Monday.

“The dollar lost some traction as equity markets sank following the latest media report on U.S. trade policy,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

He was referring to a Bloomberg report stating that the Trump administration was considering using a law reserved for national emergencies in a crackdown on some Chinese investments.

“The threat of all-out risk avoidance caused by trade concerns has eased, but some ‘risk off’ moves are likely to keep impacting currencies as long as uncertainties remain,” Yamamoto said.

The euro was 0.05 percent higher at $1.2411 after losing 0.3 percent overnight on soft euro zone economic data and dovish-sounding comments from Erkki Liikanen, a member of European Central Bank’s Governing Council.

The pound gained 0.15 percent to $1.4177 after falling 0.5 percent on Tuesday. (Reporting by Shinichi Saoshiro Editing by Eric Meijer)

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