* Euro, dollar gain as Putin pulls back troops on exercise
* Markets still focused on Crimea, major currencies in ranges
* Aussie struggles in face of new central bank warning
* Non-farm payrolls, ECB meeting loom later in week
By Patrick Graham
LONDON, March 4 (Reuters) - The dollar and the euro rose against the yen on Tuesday, helped by signs Russia may be seeking to avoid further escalation of its military involvement in Ukraine.
The euro had fallen sharply against the yen, traditionally seen as a safe haven, after Western powers threatened over the weekend to take steps to isolate Russia economically, raising a host of risks for Western Europe and the global economy.
But a sell-off in the rouble and Russian assets halted on Tuesday, and investors pulled money out of the perceived safety of the yen, helped by Russian President Vladimir Putin’s ordering some troops in Russia back to base.
Putin later told a news conference he saw no need to use military force in Ukraine’s Crimea region for now.
The surprise for some dealers has been the extent to which major currencies have taken in their stride the West’s biggest confrontation with Russia since the Cold War.
“We came in yesterday expecting it to be bedlam,” said one senior dealer with a large European bank in London. “Instead, particularly on euro-dollar its been among the quietest 36 hours I can remember.”
There was some movement overnight. The euro and the dollar both gained around half a percent against the yen to 140.16 and 101.86 respectively. The euro rose 0.2 percent to $1.3752.
The Swiss franc, also seen as a safe haven, retreated from its strongest in a year against the euro, trading at 1.2172 francs compared to the Swiss National Bank’s cap of 1.20.
“Given three days worth of bad headlines, I think the market was just willing to take any sort of stability it can get,” said Geoffrey Yu, a strategist with UBS in London.
“Given the amount of reduction in risk we saw yesterday people were just looking to get back in.”
Traders were also looking ahead to major economic events later this week.
Opinion remains deeply divided as to the European Central Bank’s likely course of action at a policy meeting on Thursday.
A higher than expected inflation number last Friday prompted many to pare bets on outright easing of interest rates but that is not the only action the bank can take.
An ECB source told Reuters there would be unanimous agreement to end so-called sterilisation of the bank’s bond purchases under the bank’s Securities Markets Programme.
“I think there is some degree of easing priced into markets,” UBS’s Yu said. “That’s not our position but we do think we may get some dovish talk from (ECB President Mario)... Draghi. So it may be a case of the euro rising on the decision and falling on his comments an hour later.”
UBS is also among the many banks predicting a stronger dollar this year. That move has so far failed to materialise, largely thanks to a halt in the flow of improving U.S. data.
Most put that down to extremely harsh winter weather, however, and non-farm payrolls data on Friday is seen unveiling a more bullish increase of 150,000 jobs in February.