(Updated at 4:02 p.m. ET/2002 GMT)

By Chuck Mikolajczak

NEW YORK, March 15 (Reuters) - A gauge of global stocks

fell on Friday and was set for a weekly decline that would snap

seven straight weekly gains, while the dollar rose and was on

track for its strongest week since mid-January, as U.S.

inflation data has led to new hopes for interest rate cuts.

Data on Friday showed U.S. import prices increased

marginally in February as a surge in the cost of petroleum

products was partially offset by modest gains elsewhere,

suggesting an improving inflation picture.

Equities struggled this week after readings on U.S. consumer

prices and producer prices indicated inflation remains sticky,

dampening expectations the U.S. Federal Reserve will cut rates

by its June meeting.

Markets are pricing in a 59.2% chance for a rate cut of at

least 25 basis points (bps) by the Fed in June, down from 59.5%

in the prior session and 73.3% a week ago, according to CME's

FedWatch Tool.

The central bank is widely expected to hold rates steady at

its policy meeting next week but investors will be watching the

central bank's economic projections, including its interest rate

forecast.

"We seem in a period here where everyone knows rates

eventually will be lowered. The expectation of when it happens

keeps getting slightly pushed back, but investors still believe

it will happen," said Rick Meckler, partner at Cherry Lane

Investments in New Vernon, New Jersey.

"It's been a back-and-forth market as people reposition

and consider whether some of the real winners have just gone a

little bit too far, so you're seeing them trade off."

On Wall Street, the Dow Jones Industrial Average fell

190.89 points, or 0.49%, to 38,714.77, the S&P 500 lost

33.53 points, or 0.65%, to 5,116.95 and the Nasdaq Composite

lost 155.35 points, or 0.96%, to 15,973.17.

For the week, the S&P 500 lost 0.13%, the Dow shed 0.02% and

the Nasdaq declined 0.73%.

In addition, a survey from the University of Michigan showed

its preliminary reading on consumer sentiment and inflation

expectations were little changed in March while a separate

report said production at U.S. factories increased more than

expected in February.

The dollar index gained 0.05% at 103.43, recouping

some of the prior week's decline with a gain of 0.71%, with the

euro up 0.06% at $1.0889 on the session. Sterling

weakened 0.13% at $1.273.

Against the Japanese yen, the dollar strengthened

0.49% to 149.05, despite expectations the Bank of Japan is

expected to end its negative interest rate policy at its meeting

next week.

MSCI's gauge of stocks across the globe

fell 5.07 points, or 0.66%, to 767.58, poised for its third

straight daily decline, the longest streak since the start of

the year, and down 0.48% on the week.

The STOXX 600 index closed down 0.32%, while

Europe's broad FTSEurofirst 300 index fell 7.42 points,

or 0.37%.

The yield on benchmark U.S. 10-year notes was up

1 basis point at 4.308% after reaching 4.322%, its highest since

Feb. 23. The 10-year yield has jumped 22 bps this week, the most

since mid-October.

The 2-year note yield, which typically moves in

step with interest rate expectations, rose 3.9 basis points to

4.7297% and has risen 24.6 bps for the week, its largest jump in

two months.

Oil prices dipped, a day after topping $85 a barrel for the

first time since November. The oil benchmarks were on track to

close out the week with a gain of more than 3%. U.S. crude

settled down 0.27% lower on the day at $81.04 a barrel

and Brent settled off 0.09% to $85.34 per barrel.