* Signs of diplomacy seen to ending violence in Ukraine
* Yellen stresses need for interest rates to stay low
* Sterling reaches near 4-1/2-year high vs greenback
* U.S., U.K., European markets to close for Good Friday (Updates market action, adds quote)
By Richard Leong
NEW YORK, April 17 (Reuters) - The yen fell on Thursday as efforts toward finding a diplomatic solution to ending violence in eastern Ukraine prompted traders to trim safe-haven yen holdings ahead of the Easter holiday weekend.
Trading volumes faded before an extended weekend in the United States, Britain and parts of Europe. London, which has the biggest share of daily global currency trading, will be shut on Friday and Monday, while U.S. financial markets will be closed on Friday. Markets in Tokyo will be open, however.
The yen, to which traders flock during episodes of geopolitical tension, had strengthened this week on fears that rising violence between Ukrainian troops and pro-Russian fighters in the eastern part of Ukraine might escalate into a full-blown civil war.
In an attempt to avert further fighting, the United States, Russia, Ukraine and the European Union issued a joint statement calling for an end of violence in eastern Ukraine, a little more than a month after Crimea voted to separate from Ukraine.
The joint statement spurred traders to trim their safe-haven holdings in the yen and the Swiss franc as well as in U.S. Treasuries, analysts said.
"The statement reduces the geopolitical concerns that have been overhanging market. That's why we've seen a pop up in Treasuries yields and the dollar," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
The yen erased modest gains against the dollar and euro and was last down 0.2 percent against both the greenback and the shared euro zone currency in late trading at 102.44 yen and 141.53 yen, respectively.
Benchmark U.S. 10-year Treasuries yields rose to 2.72 percent, their highest in nine sessions.
Esiner said the yen's reversal was modest because "one statement is not enough to alleviate all the geopolitical uncertainties in the market."
On the week, the yen fell 0.8 percent against the dollar, giving back some of last week's 1.6 percent gain. It shed 0.2 percent against the euro on the week.
The yen's pullback helped lift the dollar from earlier lows against the euro and other major currencies.
The euro was at $1.3814, unchanged on the day after hitting a session low of $1.3811. On the week, the euro zone single currency was on track to fall 0.5 percent versus the dollar following a 1.3 percent rise the previous week.
The Russian rouble ended 1.2 percent higher against the dollar at 35.60 roubles after hitting its weakest level since mid-March two days earlier.
YELLEN COMMENT CASTS PALL OVER DOLLAR
The dollar was weaker overnight after Federal Reserve Chair Janet Yellen said on Wednesday that low interest rates are needed to support the U.S. economy even though such a policy stand hurts the currency.
Dollar weakness helped propel sterling to its highest against the U.S. currency since late 2009 as investors continued to price in expectations for a Bank of England interest rate hike in the first quarter of 2015 after strong jobs and wages data on Wednesday.
Sterling reached $1.6842, its highest since late 2009 during European trading before ending the day at $1.6790, little changed on the day.
The greenback also slipped against the euro and the yen earlier. Its losses were held in check by a stronger-than-expected reading from the Philadelphia Federal Reserve on business activity in the U.S. Mid-Atlantic region.
Yellen in her second public speech as the head of the U.S. central bank on Wednesday stressed the need for accommodative policy, citing the current anemic pace of price growth as more of an economic threat than the risk of rising long-term inflation.
Her dovish remarks overshadowed the Philly Fed report, the fall in jobless claims and other recent data suggesting that the U.S. economy was regaining momentum.
This latest evidence, however, was not robust enough to override Yellen's rhetoric on low rates, analysts said.
"The data are not strong enough to push back the dovish stand," said Sebastien Galy, currency strategist at Societe Generale in New York.
(Additional reporting by Anirban Nag in London and Lisa Twaronite in Tokyo; Editing by James Dalgleish)
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