(Reuters) - The safe-haven Japanese yen fell back on Friday and risk-sensitive currencies like the Australian dollar advanced as investors took comfort from news of talks between the United States and Russia over the crisis in Ukraine.
The euro edged higher versus a weaker dollar.
The yen and rival safe-haven, the Swiss franc, have gained this week as investors sought safety amid rising tensiona on the Ukrainian border, where more than 100,000 Russian troops are massed.
Western powers say Russia is looking for a pretext to invade, a charge Moscow rejects.
The improvement in sentiment on Friday came after U.S. State Department said late on Thursday that 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 provided some relief after a jittery Thursday following exchanges of fire between Kyiv's forces and pro-Russian separatists.
RISK APPETITE SUBDUED
"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 0.2% on the yen, and earlier reached as high as 115.28 yen, having touched a two-week low of 114.78 in early Friday trading.
For the week the dollar remains down 0.3% versus 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 0.12% on the franc on Friday to 0.9208 francs while the euro rose 0.1% versus the Swiss currency.
Currencies highly sensitive to broad investor sentiment rose. The Australian dollar gained 0.4% to $0.7218.
The euro continued its week of choppy trading based on Ukraine headlines and was last up 0.1% at $1.1369, while the pound climbed slightly to $1.363, supported by markets betting on more monetary tightening from the Bank of England.
"The back and forth of the Ukraine crisis continues to dominate FX markets, but investors have progressively become more prudent after the optimism that prevailed earlier this week amid initial signs of a de-escalation.
The net result in FX is to further lock currency majors within tight trading ranges," UniCredit analysts wrote in a note sent to clients.
The improved mood did little to help bitcoin, which was trading around $40,768, near two-week lows, after a tumble late on Thursday.
