* Dollar steadies after dip on Mnuchin strong dollar comments
* Trump talks protectionism, border taxes rather than stimulus
* Japanese shares pressured as yen highest in nearly 8 weeks
* Sterling dips briefly after UK court ruling on Brexit vote
* Gold, oil and bulk metals boosted by recent dollar decline
By Marc Jones
LONDON, Jan 24 (Reuters) - The dollar steadied on Tuesday, recovering from a dip on fears that U.S. President Donald Trump's focus on protectionism over fiscal stimulus suggested his administration might be content to gain a competitive advantage through a weaker currency.
The talk of trade wars came in the face of more data pointing to a revival in activity worldwide. A survey of Japanese manufacturing showed the fastest expansion in almost three years, as French business activity hit a 5-1/2 year peak.
European stocks FTEU3 gained 0.3 percent as the upbeat data combined with a 2-1/2 year high in commodity stocks and on a 1 percent jump in Italian stocks following a merger deal for two of its banks. .EU
They made additional ground as Britain's top court ruled that the UK government must get parliamentary approval to start the Brexit process, though sterling GBP= briefly dipped on news Scotland, Wales and Northern Ireland's assemblies would not have to give their assent. was largely fine-tuning however. Both the euro EUR= and sterling GBP=D4 had already been pushed back by the dollar .DXY as it clawed back from an overnight tumble that had taken the dollar index .DXY below the 100 point threshold.
"Most of the PMIs around the world have been quite strong so there is no bad news here, but the protectionism above stimulus story (from Trump) has given the dollar bulls reason for pause," said Saxo bank's head of FX strategy John Hardy.
"The dollar rally needs to find some support pretty soon otherwise we are facing a potentially serious correction."
Sentiment had taken a knock on Monday when U.S. Treasury Secretary nominee Steven Mnuchin told senators that he would work to combat currency manipulation but would not give a clear answer on whether he thought China was manipulating its yuan.
In written answers to a Senate Finance Committee, Mnuchin also reportedly said an excessively strong dollar could be negative in the short term. dollar duly skidded as far as 112.52 yen JPY= , breaking last week's trough and the lowest since late November. Its 1.7 percent loss on Monday was the largest since July 29 though it had recovered to stand at 113.21 yen by 1015 GMT.
SCEPTICISM GROWS
While Trump promised huge cuts in taxes and regulations on Monday, he also formally withdrew from the Trans-Pacific Partnership (TPP) trade deal and talked of border tariffs.
"It's interesting that markets did not respond positively to a reaffirmation of lower taxes and looser regulation, reinforcing the impression that all the good news is discounted for now," wrote analysts at ANZ in a note.
"As week one in office gets underway, there is a growing sense of scepticism, not helped by the tone of Friday's inaugural address and subsequent spat with the media."
Doubts about exactly how much fiscal stimulus might be forthcoming had helped Treasuries rally. Yields on 10-year notes US10YT=RR steadied at 2.42 percent in European trading, having enjoyed the steepest single-day drop since Jan. 5 on Monday.
Two-year yields US2YT=RR were around 1.16 percent, narrowing the dollar's premium over the euro to 183 basis points from a recent top of 207 basis points.
The recent drop in the dollar boosted industrial metals including copper and iron ore, while gold was near two-month high at $1,212 an ounce XAU= .
Oil prices edged up too as signs that OPEC and non-OPEC producers were on track to meet output reduction goals largely overshadowed a strong recovery in U.S. drilling.
U.S. crude futures CLc1 added 45 cents to $53.19, while Brent crude LCOc1 eased 50 cents to $55.71 a barrel. O/R