The Australian and New Zealand dollars took only a brief knock on Tuesday when Washington made good on past threats and announced tariffs on $200 billion of Chinese imports, with the risks so well flagged that losses were fleeting.
The Aussie dollar AUD=D3 was back up at $0.7188, having initially slipped around 40 ticks to as deep as $0.7144. It remained some way above recent lows at $0.7085.
Speculators are structurally short of the currency having sold for weeks in anticipation of an escalation in the Sino-U.S. trade dispute.
The Reserve Bank of Australia (RBA) used minutes of its September policy meeting to warn that protectionism was a "material risk" to an otherwise upbeat outlook for the global and local economies.
The bank also welcomed the "modest" decline in the Aussie, saying it would help support economic growth.
While policy makers remained optimistic on the economic outlook overall, they still saw no reason to raise interest rates given slack wages growth and low inflation.
"If we are right in thinking that the economy won't live up to the RBA's hopes, then a rate hike may still be two years away," said Paul Dales, head of Australian economics at Capital Economics.
"This will prompt the Australian dollar to weaken from $0.71 now to $0.65 next year."
The kiwi dollar NZD=D3 firmed 0.2 percent to $0.6591 and continued to hold above the recent trough of $0.6501.
It had blipped higher earlier when New Zealand Prime Minister Jacinda Ardern suggested she had been given a "hint" that domestic data on economic growth this week would be pleasing.
The official statistics bureau quickly noted that the PM had not seen the data and her office said she was mistaken.
The GDP data are due out on Thursday and economists polled by Reuters predicted growth of 0.7 percent in the second quarter for an annual expansion of 2.5 percent.
If the figures disappointed it could spark speculation that the Reserve Bank of New Zealand might start to consider cutting interest rates from already record lows.
New Zealand government bonds
0#NZTSY= eased, nudging yields up around 3 basis points.Australian government bond futures also pulled back, with the three-year bond contract YTTc1 off 2.5 ticks at 97.920. The 10-year contract YTCc1 dipped 2.25 ticks to 97.3400.
The Australian government is selling a new benchmark issue of 2050 indexed bonds through syndication on Tuesday.
