- After rallying this week, safe-haven currencies drop
- Aussie adds 0.4% as global sentiment improves
- Analysts say market direction tied to Ukraine crisis
- Chinese yuan hits near 4-year high in offshore markets
LONDON, Feb 18 (Reuters) - The safe-haven Japanese yen fell back on Friday and risk-sensitive currencies, such as the Australian dollar advanced as investors took comfort from a plan to hold talks between the United States and Russia over the crisis in Ukraine.
The euro edged higher against a weaker dollar.
The yen and rival safe haven, the Swiss franc, have gained this week with investors unsettled by rising tensions on the Ukrainian border, where Russia deployed more than 100,000 troops. Western powers say Russia is looking for a pretext to invade, a charge Moscow rejects.
Sentiment improved after news late on Thursday that U.S. Secretary of State Antony Blinken had accepted an invitation to meet with Russian Foreign Minister Sergei Lavrov late next week provided Russia does not invade Ukraine.
This followed a jittery Thursday when Kyiv's forces and pro-Russian separatists exchanged fire.
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"The confirmed meeting between Blinken and Lavrov may mean markets conditions remain stable into the weekend but the appetite for risk will likely be contained until that meeting takes place," said MUFG analyst Derek Halpenny.
The dollar rose 0.3% on the yen , reaching as high as 115.3 yen, having touched a two-week low of 114.79 in early Friday trading.
For the week the dollar remains down 0.3% against the Japanese currency - a relatively small move given the geopolitical tensions of the past week that suggests investors are not yet panicking about the crisis.
The dollar also gained 0.2% on the franc on Friday to 0.9216 francs, while the euro rose 0.1% against the Swiss currency .
China's yuan hit its strongest since April 2018 in offshore markets.
Stuart Cole, macroeconomist at Equiti Capital, said the rally was a "response to the fact that the Chinese authorities have done nothing to stem the rise of the yuan so far this year." He said the currency has been bolstered by solid Chinese export performance and inward investment.
The offshore yuan reached as high as 6.3182 yuan per dollar .
Other currencies sensitive to broad investor sentiment rose. The Australian dollar gained as much as 0.4% to $0.7228before giving up some of those gains.
The euro continued its week of choppy trading based on Ukraine headlines and was unchanged on the day at $1.136 .
"The back and forth of the Ukraine crisis continues to dominate FX markets," UniCredit analysts wrote in a note sent to clients. "The net result in FX is to further lock currency majors within tight trading ranges."
The improved mood did little to help bitcoin , which slipped 1% to $40,229, near two-week lows.
Reporting by Tommy Wilkes Additional reporting by Alun John in Hong Kong and Saikat Chatterjee in London Editing by Gareth Jones and Tomasz Janowski