* China-U.S trade talks make "substantial progress"
* Aussie, Kiwi also gain
* Analysts caution that trade optimism priced in
* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh (Adds details, quotes, updates with latest prices)
By Tommy Wilkes
LONDON, Feb 25 (Reuters) - China's yuan touched a seven-month high and the commodity-linked Australian and New Zealand dollars gained on Monday after U.S. President Donald Trump confirmed he would delay a planned increase in tariffs on Chinese imports.
Trump said on Sunday that he would push back a March 1 deadline after trade talks between Washington and Beijing made "substantial progress".
Chinese equities surged as investors and European shares also opened higher.
The offshore yuan rose as high as 6.6737 per dollar and was up 0.3 percent at 6.68 by 1020 GMT.
"There was a huge risk premium in the renminbi that is being priced out," said Esther Reichelt, Frankfurt-based FX strategist at Commerzbank. News of the postponement was "not that much of a surprise" as the market had already been factoring in reduced China-U.S. trade tensions.
The Australian dollar, seen as a proxy for China risk because of Australia's dependence on Chinese demand for its exports, rose half a percent to $0.7168. The New Zealand dollar gained 0.7 percent to $0.6889.
The euro gained against a weaker dollar, adding 0.2 percent to $1.1354 to keeping it within recent trading ranges.
The dollar index, which measures it against a basket of other currencies, fell 0.1 percent to 96.390 as investors sold and bought currencies considered riskier.
"You couldn't get a more 'risk on' ranking of G10 currencies than we have this morning," said Kit Juckes, Societe Generale's foreign exchange analyst, citing gains for the Australian and New Zealand dollars and the Swedish and Norwegian crowns.
With the dollar weaker and optimism improving, emerging- market currencies also rose, with the rand strengthening 1 percent.
Concern about Chinese economic growth and global growth have weighed on sentiment in recent months, although 2019 has also seen a rally in risk assets after the U.S. Federal Reserve paused in its interest rate increases.
Sterling rose 0.3 percent towards $1.31 as traders considered whether the British government might delay Brexit should Prime Minister Theresa May fail to secure support for her withdrawal agreement.
May has put off a vote on her Brexit deal until as late as March 12 - 17 days before Britain's official departure date from the European Union - exacerbating fears of a no-deal Brexit.
The Japanese yen was unchanged against the dollar at 110.64 yen per dollar. (Editing by Larry King)