NEW YORK, Feb 17: The ailing dollar stabilized Friday after three rocky sessions, as currency traders shook off weak US economic data and the greenback saw some relief from a big global merger announcement.

The euro edged up to $1.3142 at 2200 GMT after 1.3139 late Thursday in New York.

The dollar firmed slightly to 119.37 yen from 119.18 on Friday.

The US producer price index, which measures inflation at the wholesale level, fell 0.6 percent in January, the largest monthly fall since October.

Meanwhile, a separate report showed US housing starts slid 14.3 per cent in January to a seasonally adjusted 1.408 million units, marking the lowest level in over nine years.

Both reports suggested the Federal Reserve is unlikely to hike interest rates soon, and if the weakness persists it could lead to rate cuts.

Wholesale price pressures continue to ebb on fizzling energy costs and intense global competition, said BMO Financial economist Sal Guatieri.

This will bolster the Fed's confidence that inflation pressures are on the wane, setting the stage for a rate cut later this year.Some analysts said the dollar got a reprieve when BBVA bank, the second-biggest Spanish bank, reached an agreement to buy Texas-based US bank Compass Bancshares for 9.6 billion US dollars (7.4 billion euros).

A giant deal will bolster demand for dollars, driving up the value of the greenback, at least temporarily.

Despite this (soft economic) data, the dollar was somewhat buoyed by merger and acquisition activity as the Spanish bank BBVA announced it is buying US Compass Bancshares, said Hilary Love at PNC Bank.

But she added that with recent weaker-than-expected data, the markets are now assigning about a 20 percent probability of the Federal Reserve easing by July of this year. The dollar will continue to have a weaker bias unless the data starts coming out on the strong side. In late New York trade, the dollar stood at 1.2353 Swiss francs after 1.2346 Thursday.

The pound was being traded at $1.9495 from 1.9513 late Thursday.--AFP