(Corrects wording of tariffs in the sixth paragraph)
* Eyes on Sino-U.S. trade talks touted for this week
* China shares up modestly in early trade, Nikkei slips
* Dollar off highs, focus on China yuan and Turkish lira
By Wayne Cole
SYDNEY, Aug 20 (Reuters) - Asian share markets crept cautiously higher on Monday as investors awaited developments on proposed Sino-U.S. trade talks and the Chinese yuan rallied away from dangerous lows.
MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.4 percent, while Shanghai blue chips firmed 0.2 percent.
Moves were modest with Japan's Nikkei off 0.3 percent in thin trade, while EMini futures for the S&P 500 edged up 0.05 percent.
The yuan reached its highest in a week at 6.8512 per dollar as Beijing acted to prevent a test of the psychologically important 7.0000 level.
Investors were also encouraged by news China and the United States will hold lower-level trade talks this month, offering hope that they might resolve an escalating tariff war.
Reports suggested the talks in Washington would take place on Aug. 21 and 22, just before U.S. tariffs on $16 billion of Chinese goods take effect.
The U.S. Trade Representative's office said on Friday it doubled the length of tariff hearings on the next $200 billion worth of Chinese goods to six days from the previously planned three due to overwhelming demand from companies to testify.
The hearings will be held Aug. 20-24 and on Aug. 27.
Dealers cited speculation the talks could set the stage for a summit between U.S. President Donald Trump and Chinese President Xi Jinping in November.
"Although such a timeline for agreement is totally unrealistic given how far apart the two sides are, the positive headlines should help sentiment to improve and a positioning unwind of USD is possible," said analysts at JPMorgan.
"This would set EM Asia equities up for a short term squeeze, with HK/China yuan sensitives likely leading the way higher."
STEADY FOR NOW
Helping the general mood was a steadying in the Turkish lira, which was holding around 6.0000 per dollar on Monday.
Qatar and Turkey's central banks have signed a currency swap to provide liquidity and support for financial stability, Qatar's central bank said on Sunday.
"Sentiment toward Turkey has stabilised, but medium-term vulnerabilities remain substantial and markets continue to penalise currencies with weak fundamentals," cautioned Barclays economist Michael Gapen.
"But we see contagion risk from Turkey as a relatively low-risk outcome. History indicates emerging market volatility is unlikely to knock the U.S. economy, or the Fed, off course."