FOREX-Dollar holds weekly gains as war uncertainty keeps markets on edge

* Dollar supported by safe-haven demand amid unresolved US-Israel-Iran conflict

* Central banks expected to maintain cautious stance, with key policy meetings ahead

* Japan signals readiness to intervene in FX market, warns against speculation (Updated in New York morning time)

By Karen Brettell and Lucy Raitano

NEW YORK/LONDON, April 24 (Reuters) - The dollar dipped on Friday but remained on pace for a weekly gain as traders continued to assess the prospects for a resolution to the U.S.-Israeli war with Iran.

The currency has been buoyed at times by optimism that a near-term deal could end the conflict, then weighed down by fears that a prolonged war will trigger lasting energy disruptions. With the outcome still uncertain, many traders are reluctant to take on large positions, keeping the market largely range-bound.

"Right now you really can't have anything on the table because you don't know where this is going," said Lou Brien, strategist at DRW Trading in Chicago.

"Unless there's some big news like they just all declare peace and go home, I think the next real move on the markets is going to be a reaction to real things, such as shortages of crude oil affecting economic performance in Europe or Asia," he said.

Iran's Foreign Minister Abbas Araqchi was expected in Islamabad on Friday, venue for past peace talks with the United States, raising hope that negotiations could resume after they collapsed earlier this week.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.11% to 98.71, with the euro up 0.14% at $1.1699. The dollar index is heading for a weekly 0.50% gain, with the euro on track for a 0.53% weekly loss.

The Japanese yen strengthened 0.05% against the greenback to 159.62 per dollar. Sterling strengthened 0.16% to $1.3488.

"If you look at the last week, the major theme is just that there's no real progression with peace talks. For markets, it's difficult when there's no deadline," said Tommy Von Br?msen, FX strategist at Handelsbanken in Stockholm.

CENTRAL BANK BONANZA LOOMS

Traders are also looking ahead to a busy week for central banks, with the Federal Reserve, the Bank of Japan, the European Central Bank, and the Bank of England among those set to announce policy decisions.

"The main message from the central banks is that they are - so far at least - in a kind of 'wait-and-see' approach," Handelsbanken's Von Br?msen said.

Fed funds futures traders are pricing in just a 23% chance of a Fed interest rate cut this year, reflecting concerns about a renewed bout of inflation.

The European Central Bank is expected to hold its deposit rate on April 30, but just over half of economists polled by Reuters forecast a hike in June, as policymakers look to shield the euro zone economy from a war-induced energy shock.

The Bank of England meets on Thursday. Money markets are pricing in a rate hike by year-end, though no change is expected at next week's meeting.

In Japan, core consumer inflation slowed below the Bank of Japan's 2% target for a second consecutive month in March. Analysts expect price pressures to pick back up in the coming months as companies begin passing on higher fuel costs stemming from the Middle East conflict.

The BOJ is set to conclude its two-day policy meeting on Tuesday and is widely expected to hold interest rates steady, as fading prospects for a near-term end to the war keep Japan's economic and price outlook highly uncertain. That said, the central bank is still expected to signal its readiness to tighten policy to counter mounting inflationary pressures.

Japanese Finance Minister Satsuki Katayama on Friday reiterated her verbal warning on intervention, saying authorities stand ready to take "decisive" action against speculative moves in the foreign exchange market. Her comments came a day after she said Japan has a "free hand" to intervene and that past interventions had been effective.

In cryptocurrencies, bitcoin gained 0.30% to $78,186. (Reporting by Karen Brettell and Lucy Raitano Editing by Nick Zieminski)