* Investors exit safe-haven positions on Middle East

peace hopes

* Trump says US-Iran talks could take place over the

weekend

* Yen near 160/dollar as Ueda leaves markets guessing on

next hike

(Update prices to Asia afternoon)

By Jiaxing Li

HONG KONG, April 17 (Reuters) - The U.S. dollar was

headed for a second consecutive weekly decline on Friday in

cautious trade, as a ceasefire between Israel and Lebanon and

prospects for fresh Iran talks prompted investors to unwind

safe-haven positions.

A 10-day ceasefire between Lebanon and Israel went into

effect on Thursday and President Donald Trump said the next

meeting between the U.S. and Iran could take place over the

weekend.

Meanwhile, U.S. and Iranian negotiators have scaled back

ambitions for a comprehensive peace deal and are now seeking a

temporary memorandum to prevent a return to conflict, with the

nuclear issue remaining a core obstacle.

Currencies were mostly rangebound in Asia trade as investors

awaited further details, leaving the euro steady at

$1.1782. The common currency was on track for a third straight

weekly gain, while sterling fetched $1.3525.

Both currencies have now largely recouped losses triggered

by the Iran conflict, hovering near their highest levels in

seven weeks.

The dollar index, which measures the greenback's

strength against six major peers, was steady at 98.235. It was

on track for a second straight week of declines, having given up

most of the gains sparked by the war, as ceasefire optimism

continued to reduce demand for safe-haven assets.

"The markets are in a bit of a consolidation phase because

they have already priced in some optimism about the ceasefire

being extended earlier in the week," said Sim Moh Siong, FX

strategist at OCBC.

"You will need the next catalyst to provide a more

directional move. It's no longer a one-way street for the dollar

from here."

The risk-sensitive Australian dollar fetched $0.7167,

staying near four-year highs on buoyant risk sentiment. The kiwi

traded roughly 0.1% lower at $0.5887.

Against the yen, the dollar rose slightly to 159.47.

Bank of Japan Governor Kazuo Ueda on Thursday steered clear of

signalling a rate hike was on the cards this month, heightening

the chance it will hold fire at least until June.

MARKETS WATCH CENTRAL BANK RESPONSE TO INFLATION RISKS

Investor are keen to see how policymakers will tackle

war-induced inflation pressures, with central banks taking a

largely cautious stance for now.

U.S. Treasury yields held steady on Friday, after rising in

the previous session, as still-elevated oil prices kept

inflation worries alive.

The two-year yield was last at 3.7816%, while the

benchmark 10-year yield was steady at 4.3193%.

Fed funds futures show markets continue to bet that the

Federal Reserve will keep rates on hold this year, sharply

shifting from expectations of two rate cuts that were priced in

before the war.

Group of Seven finance ministers and central bank governors

have agreed to remain ready to act to mitigate economic and

inflation risks caused by the Middle East conflict's energy

price and supply shocks, French Finance Minister Roland Lescure

said on Thursday.

The cautious tone was echoed by European Central Bank

policymakers, who played down the chance of a rate hike as soon

as this month, arguing that more data will be needed and the

precise timing of a move was of secondary importance.

New applications for U.S. unemployment benefits fell more

than expected last week, suggesting labor market conditions

remained stable. That is also seen giving the Fed room to keep

interest rates unchanged for some time while policymakers

monitor the inflation fallout from the war.

"Hiking into a negative supply shock cannot compensate for

energy-driven inflation in the near term and risks exacerbating

growth headwinds," ANZ said in a research note.