* FTSEurofirst 300 closes 0.2 percent higher
* Falls for fourth straight week
* Libya ceasefire boosts investor sentiment
* G7 intervention helps calm nerves
By Brian Gorman
LONDON, March 18 (Reuters) - European shares edged higher on Friday after the Group of Seven nations' intervention to weaken the yen and Libya's move to halt military action helped boost investor sentiment.
One factor capping gains was China's decision to raise banks' required reserves again, the latest instalment in its monetary tightening cycle that many had thought would be put on hold after Japan's devastating earthquake.
The pan-European FTSEurofirst 300 index of top shares rose 0.2 percent to close at 1,088.82 points. Volume was high, at more than 165 percent of the 90-day average for the index, boosted by "quadruple witching".
Over the week, the index fell 3 percent, a fourth week of declines, the longest losing streak in more than a year.
On the civil unrest in North Africa, some analysts and politicians were sceptical about Libya's ceasefire lasting. But strategists remained upbeat about the prospects for equities.
"We'll leave the jury out on the Libya issue," said Dean Tenerelli, fund manager at T Rowe Price, who said the market would regain the peak of a month ago and rise further.
"European equities are trading well below historic p/e averages. The pullback is a buying opportunity. The world continues to recover. The policy move that we saw by China today is part of a move to control inflation, which is healthy."
The auto sector was among those helping the index to recover some losses from earlier in the week. Daimler, Peugeot and Renault gained between 1.5 and 3.1 percent.
Vestas, the world's largest wind turbine maker, gained 4.3 percent. The company is to supply turbines to a Mexican wind energy development with total capacity of 396 megawatts, the customers said on Friday.
Libya said on Friday it would halt all military operations to protect its civilians and comply with a U.N. resolution, backtracking from a threat to root out rebels after Western powers warned of punitive action.
In an effort to restore confidence to the markets, the G7 stepped in to weaken the Japanese yen, which had soared to a record.
But some traders said the market could succumb to further weakness in the weeks ahead as Japan's nuclear crisis is far from over.
SCHNEIDER GAINS
Japan's nuclear crisis continued to have a specific impact on some European companies. French engineering company Schneider , for example, gained 3.2 percent, as traders said the company would benefit from a push towards greater energy efficiency after the Japanese disaster.
Chemicals heavyweight BASF was also among the gainers, up 1.7 percent, after JP Morgan upgraded it to "overweight" from "neutral".
On the downside, Germany's E.ON fell 1.6 percent after the company took its Unterwese reactor offline under Tuesday's government decree in the light of events in Japan.
Equity valuations on Thomson Reuters Datastream showed the STOXX Europe 600 carrying a forward price-to-earnings ratio of 10.8, below a 10-year average of 13.6. (Editing by Will Waterman)