By Wayne Cole
SYDNEY, July 6 (Reuters) - The Australian and New Zealand dollars steadied on Friday as the long-dreaded launch of U.S. tariffs on Chinese imports drew a muted response from markets where much of the negative news had already been priced in.
The Aussie dollar AUD=D3 was holding its nerve at $0.7398, some way above the recent 18-month trough around $0.7311. That left it flat for the week but shy of chart resistance at $0.7425.
The kiwi dollar NZD=D3 hovered at $0.6798, a fraction firmer for the week and a resilient performance given it recently touched lows not seen since May 2016 at $0.6688.
President Donald Trump's tariffs on $34 billion in Chinese imports finally took effect as a deadline passed on Friday, with Beijing having vowed to respond immediately in kind. share markets had already fallen in anticipation so the immediate reaction was slight, with little sign of a fresh rush to safe haven assets.
"Much of this still looks like a negotiating stance or all the tariffs would already have started up by now, and Trump knows that the costs to U.S. workers and consumers will escalate" said Shane Oliver, head of investment strategy at fund manager AMP Capital.
"So our base case remains that some form of negotiated solution will be reached, but things are likely to get worse before they get better."
China is Australia's single biggest export market and the world's largest buyer of commodities, making the Australian economy particularly vulnerable to any slowdown there.
This added risk has led markets to push out any chance of a rate hike in either Australia or New Zealand until far into 2019, and pulled down bond yields to multi-month lows.
Yields on Australian 10-year paper AU10YT=RR have fallen 34 basis points since mid-May to stand at 2.60 percent. New Zealand 10-year yields NZ10YT=RR are at 2.84 percent, having eased from a 3.06 percent top in June.
Australian bond futures duly ran into some profit-taking on Friday with the three-year bond contract YTTc1 off 1 tick at 97.925. The 10-year contract YTCc1 dipped 1.5 ticks to 97.3800.