LONDON, Aug 9 Reuters The dollar eased on Wednesday after data showed the Chinese economy slipped into deflation last month, which upped the chances for the government to roll out extra stimulus measures and nudged investors into risk assets.

Dollar selling by stateowned Chinese banks helped the yuan rally from a onemonth low, dealers said. The Chinese central bank39;s strongerthanexpected exchangerate fixing at 7.1588 per dollar before the open signalled its discomfort with the yuan39;s recent declines.

The dollar index which measures the performance of the U.S. currency against six others eased 0.1, paring some of Tuesday39;s 0.47 rise.

The euro rose 0.2 to 1.0978, while sterling eased 0.1 to 1.274. European markets gained some respite after equities tumbled the day before as the Italian government announced a surprise 40 windfall tax on banks. The finance ministry subsequently softened its stance, but the initial decision stripped 3.5 off major euro zone lenders39; shares 

Data on Wednesday showed Chinese consumer prices fell for the first time in more than two years in July. Rather than lifting safehaven appetite for the dollar, the figures reinforced the view among some investors that the Chinese government might take steps to underpin the economy with monetary stimulus.

There39;s still no signs yet from officialdom of imminent support for the Chinese economy, despite the protest of sorts against the recent runup in the dollaryuan rate implicit in the strong…