September 19, 2018 / 2:42 PM / in 3 months

FOREX-Dollar steady as investors digest Sino-U.S. tariff news

* Dollar firm against euro, yen

* Risk-sensitive Aussie rises (New throughout, updates rates, comments for U.S. market open; changes dateline; previous LONDON)

By Saqib Iqbal Ahmed

NEW YORK, Sept 19 (Reuters) - The dollar was steady against the euro and the Japanese yen and slipped against the risk-sensitive Aussie, as investors appeared little shaken by the latest round of tariffs announced by China and the United States.

The dollar index, which measures the greenback against a basket of six other major currencies, was about flat on the day at 94.647.

The euro was 0.04 percent lower, while the yen, which tends to benefit during geopolitical or financial stress as Japan is the world’s biggest creditor nation, was slightly lower against the greenback.

The Australian dollar, seen as a proxy for China-related trades as well as a barometer of broader risk sentiment, was 0.48 percent higher.

“The market reaction seems to suggest that the tariff announcement was overall on the soft side of market expectation,” said Alvise Marino, an FX strategist at Credit Suisse in New York.

China and the United States plunged deeper into a trade war after President Donald Trump levied tariffs on $200 billion worth of Chinese goods. Beijing retaliated with duties on about $60 billion worth of U.S. goods.

But Washington’s new duties were set at 10 percent for now, before rising to 25 percent by the end of 2018, rather than an outright 25 percent, as some market participants had feared.

Traders will be paying attention to next week’s Federal Reserve meeting at which the U.S. central bank is expected to raise benchmark interest rates and shed light on the path for future rate hikes.

On Wednesday, risk appetite held up across markets. Emerging-market currencies firmed, led by the Indian rupee after China said it would not retaliate with competitive currency devaluations.

The euro struggled to advance above the $1.17 line as a rise in Italian bond yields on budget concerns prompted investors to trade broad market ranges.

Meanwhile, Bank of Japan Governor Haruhiko Kuroda on Wednesday stressed that he would not pull the plug on monetary easing until inflation hits his 2 percent target, warning that escalating international trade disputes could inflict widespread damage to global growth.

The Canadian dollar strengthened to its highest in nearly three weeks against its U.S. counterpart, before paring most of its gains ahead of further talks to revamp the North American Free Trade Agreement.

Sterling gave up earlier gains and briefly hit the day’s lows on Wednesday at $1.3098 after the Times reported that Britain’s Prime Minister Theresa May had rejected an improved offer from European Union chief negotiator Michel Barnier on the Irish border issue.

Reporting by Saqib Iqbal Ahmed; Editing by Hugh Lawson and Chizu Nomiyama

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