* Dollar dipping, euro benefits from oil pullback

* Markets await more clarity on U.S.-Iran talks

* Yen underpinned by risk of Japanese intervention

* Norges Bank rate hike boosts crown

(Updates after morning European trading)

By Alun John

LONDON, May 7 (Reuters) - The dollar stayed on the

defensive on Thursday as hopes for a de-escalation in the

Iran-U.S. war supported oil-exposed currencies, while Tokyo

resumed its verbal intervention in support of the yen, making

speculators cautious.

The United States and Iran are edging toward a limited,

temporary agreement to halt their war, sources and officials

have said, with a draft framework that would stop the fighting

but leave the most contentious issues unresolved.

Reports of the possible progress have supported stock and

bond markets globally since Wednesday, while weighing on the

dollar against most major peers.

That momentum continued on Thursday, albeit in a more muted

manner.

The euro was up 0.1% on the day at $1.1763 after gaining

0.47% on Wednesday, while sterling was 0.13% higher at $1.3615

after rallying 0.4% the previous day.

"Everyone is still very focused on the Middle East and where

we are on the negotiations but really we just don't know.

Markets are reflecting that the easiest thing is to wait and see

what happens," Nick Rees, head of macro strategy at Monex

Europe, said.

Oil prices continued to show some hopes of de-escalation

that could allow exports from the Gulf to resume. Benchmark

Brent June futures were at $98.6 a barrel, well off their recent

highs, but also well above pre-war levels.

The Japanese yen was also a fraction stronger at 156.21 per

dollar, having appreciated sharply on Wednesday with speculation

that Japanese authorities had again intervened in markets to buy

their currency.

Japan may have spent as much as 5.01 trillion yen ($32.06

billion) in its latest efforts to bolster its embattled

currency, central bank data indicated on Thursday, signalling

repeated bouts of intervention in markets.

Japan's top currency diplomat, Atsushi Mimura, said

separately on Thursday the country was not restricted on

intervention.

U.S. Treasury Secretary Scott Bessent will meet Japanese

Prime Minister Sanae Takaichi next week, and the Nikkei

newspaper said they would discuss curbing speculative yen

selling, among other issues.

But analysts do not expect the yen to remain firm for long.

"Without stronger BOJ follow-through via consecutive hikes

to address its behind-the-curve stance, the yen is likely to

remain weak in the near term," Masahiko Loo, senior fixed income

strategist at State Street Investment Management, said.

Repeated interventions raise the likelihood of broader

policy action in the June to July window, consistent with the

late 2024 playbook, Loo added.

Elsewhere, Norway's crown strengthened after the central

bank raised its policy rate to 4.25% from 4% and warned

inflation was too high. The dollar hit a fresh four-year low and

was last down 0.9% to 9.249 crowns, while the euro was 0.6%

lower at 10.851 crowns.

The risk-sensitive Australian dollar rose 0.3% and

last fetched $0.7242, just below the four-year high it touched

on Wednesday.

The Swedish crown was slightly stronger at 10.846 per euro

and 9.21 per dollar after the central bank said

the risk that the Middle East war would lead to higher inflation

had increased somewhat, though it kept its policy rate unchanged

at 1.75%, as expected.