* U.S. activates tariffs on Chinese goods, Beijing’s response eyed
* Dollar edges down, euro hits 16-day high
* Immediate reaction by other major currencies limited
* Focus shifts to U.S. jobs report due later in the day
By Tom Finn
LONDON, July 6 (Reuters) - The dollar fell on Friday as U.S. tariffs on Chinese imports took effect, but a muted reaction in currency markets suggested the escalation had largely been priced in by investors focusing on a U.S. jobs report due later in the day.
The latest salvo in a trade conflict between the world’s biggest economic powers were fired on Friday when U.S. tariffs on $34 billion worth of Chinese goods came into effect .
Markets were looking for any retaliatory measures China might employ - Beijing said on Friday it had no choice but to fight back on trade - and the volatility that could cause.
The response among major currencies, however, was fairly limited.
“The first batch of tariffs is a milestone in the trade war but a very well-telegraphed one. China said it’s forced to retaliate but did not specify a time-frame. That’s helping risk appetite,” said Elsa Lignos, global head of FX strategy, at RBC Capital Markets in London.
The dollar index against a basket of six major currencies slipped to 94.317 after slipping to 94.177, its lowest since June 26, the previous day.
That helped the euro rise to $1.1727, its strongest since June 26.
The euro was lifted on Thursday by strong German industrial orders and signs Washington had softened its trade rhetoric towards European Union automakers.
The Australian dollar, a liquid proxy to China-related trades, edged up 0.1 percent to $0.7405, suggesting the region’s markets were greeting the tariffs calmly.
Against the safe-haven yen, the dollar inched down 0.1 percent to 110.560 yen and the Chinese yuan remained weaker against the dollar.
Investors wanted to know whether the tariffs were a continuation of tit-for-tat measures or an escalation between the two countries.
“Participants will be looking to shift their attention from trade matters to the U.S. non-farm payrolls, and if the jobs report is strong, dollar/yen stands poised to rise and break out of its recent range,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities in Tokyo.
The U.S. Labor Department is expected to report non-farm payrolls grew by 195,000 in June after surging by 223,000 in May. Monthly average hourly earnings probably rose 0.3 percent, taking the annual increase to 2.8 percent from 2.7 percent in May.
“Any misses in today’s data could spur a wave of profit-taking - given signs that the USD rally looks to be running out of steam,” said analysts at ING.
The pound was effectively flat at $1.3224. It had reached a nine-day high of $1.3275 on Thursday after Bank of England Governor Mark Carney said he was confident an economic slowdown was temporary, but the rise faded before Friday’s government meeting on Brexit policy.
China’s yuan was 0.2 percent weaker at 6.6506 per dollar but still some distance from Tuesday’s 11-month low of 6.7204. The yuan had retreated amid trade concerns before pulling back on assurances by China’s central bank. (Additional reporting by Shinichi Saoshiro in Tokyo, editing by Larry King)