September 18, 2018 / 3:04 AM / a year ago

FOREX-Dollar bounce fades, yuan dips, markets brace for China's response to US tariffs

* Dollar index pops up on tariffs news before losing steam

* US to impose 10 pct tariffs on $200 bln worth of Chinese imports

* Some Asian shares rise, taking in stride latest trade news

* Graphic: World FX rates in 2018 (Updates throughout)

By Shinichi Saoshiro

TOKYO, Sept 18 (Reuters) - The dollar was slightly higher on Tuesday and China’s yuan fell as global markets braced for Beijing’s response to new U.S. tariffs on Chinese goods.

The dollar index against a basket of six major currencies was up 0.09 percent at 94.585. The greenback in recent months has benefited from safe-haven flows amid the escalating Sino-U.S. trade conflict.

The index had popped up to 94.607 earlier in the session after U.S. President Donald Trump said on Monday that he will impose 10 percent U.S. tariffs on about $200 billion worth of Chinese imports, effective Sept. 24.

Trump said that if China takes retaliatory action against U.S. farmers or industries, “we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.”

“Of immediate concern to the market is how China responds to the tariffs,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

China’s yuan was a shade weaker at 6.8740 per dollar in onshore trade, though Chinese stocks managed slim gains.

“The dollar’s knee-jerk reaction has subsided somewhat as some equity markets are managing to rise despite the trade news. It appears that a consensus had already been formed beforehand on what the trade announcement would be,” said Shusuke Yamada, currency and equity strategist at Bank of America Merrill Lynch in Tokyo.

The dollar was 0.1 percent higher at 111.94 yen. It had briefly dropped to 111.66 against the yen, another safe-haven currency that draws demand in times of market tensions and risk aversion, before bouncing back.

The Australian dollar, seen as a proxy to China-related trades as well as a barometer of broader risk sentiment, was nearly flat at $0.7176, having climbed off a low of $0.7144 plumbed earlier in the session.

Some analysts doubted Beijing would be in the mood to hold trade negotiations with Washington in the wake of Trump’s latest decision. U.S. Treasury Secretary Steven Mnuchin last week invited top Chinese officials to a new round of talks, but thus far nothing has been scheduled.

The euro was down 0.05 percent at $1.1678 after rising 0.5 percent the previous day.

The pound dipped 0.1 percent to $1.3147.

Sterling had gained 0.7 percent on Monday, hitting a six-week high of $1.3165, helped by reports of progress on the Irish border question, an obstacle to Brexit that diplomats will try to overcome this week at a European Union summit.

Emerging market currencies including the Turkish lira , South African rand and the Mexican peso were all slightly lower on Tuesday. (Reporting by Shinichi Saoshiro; Editing by Richard Borsuk and Kim Coghill)

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