* Washington to announce 'largest' sanctions package
* Sanctioned North Korean Kim Yong Chol to attend Olympics
* Planned meeting with North Korean president
* Spy agency says Kim 'right person' for inter-Korean talks
* Trump's daughter to arrive in Seoul on Friday
The United States is due to announce its largest package of sanctions yet against North Korea to further pressure Pyongyang over its nuclear and missile programme, as South Korea readies itself for more talks with the North's officials.
Tougher sanctions may jeopardise the latest detente between the two Koreas amid their preparations to create conditions appropriate to hold a summit between North Korean leader Kim Jong Un and South Korean President Moon Jae-in.
A senior US administration official, who spoke to Reuters on condition of anonymity, called the new penalties "the largest package of new sanctions against the North Korea regime," without giving details.
US Vice President Mike Pence had hinted at such a plan two weeks ago during a stop in Tokyo that preceded his visit to South Korea for the Pyeongchang Winter Olympics.
North Korean leader Kim Jong Un said he wants to boost the "warm climate of reconciliation and dialogue" with South Korea after a high-level delegation including his sister returned from the Winter Olympics.
Last year, North Korea conducted dozens of missile launches and its sixth and largest nuclear test in defiance of United Nations sanctions. However, it has now been more than two months since its last missile test in late November.
The new US sanctions will be announced while President Trump's daughter, Ivanka, is visiting South Korea to attend a dinner with Moon and the closing ceremony of the Games. In addition to the dinner which will feature a kosher menu for Ivanka's dietary restrictions, the Blue House has planned a small traditional Korean music performance for her delegation.
Her visit coincides with that of a sanctioned North Korean official, Kim Yong Chol, blamed for the deadly 2010 sinking of a South Korean navy ship that killed 46 sailors. His delegation will also meet with Moon.
The Blue House has said there are no official opportunities for US and North Korean officials to meet.
Kim Yong Chol is the vice-chairman of the North's ruling Workers' Party's Central Committee and was previously chief of the Reconnaissance General Bureau, a top North Korean military intelligence agency which South Korea blamed for the sinking of its navy corvette the Cheonan.
North Korea has denied any involvement in the sinking.
South Korea on Friday said it approved the Winter Olympic visit by Kim Yong Chol in the pursuit of peace and asked for public understanding.
"Under current difficult circumstances, we have decided to focus on whether peace on the Korean peninsula and improvement in inter-Korean relations can be derived from dialogue with (the visiting North Korean officials), not on their past or who they are," said Unification Ministry Baik Tae-hyun in a media briefing.
A South Korean lawmaker briefed by the country's spy agency said on Friday that Kim was the "right person" for inter-Korean and denuclearisation talks.
"Kim Yong Chol is the top official regarding inter-Korean relations and he is being accepted (here) as the right person to discuss various issues like easing military tension, improving inter-Korean ties and denuclearisation," said Kang Seok-ho to reporters.
Kim currently heads the United Front Department, the North's office responsible for handling inter-Korean affairs.
South Korea's decision on Thursday to allow Kim, currently sanctioned by the United States and South Korea, across the border has sparked protest from family members of the dead Cheonan sailors and opposition parties.
Some 70 members from the main opposition Liberty Korea Party staged a protest in front of the presidential Blue House on Friday, demanding the government withdraw its decision.
"President Moon's decision to accept the North's facade of peace is a serious issue and it will go down in history as a crime eternal," said the party in a statement.
A group of family members of those killed in the Cheonan sinking has said it will hold a press conference against the decision on Saturday.
Acknowledging public angst over Kim's pending visit, Baik said the South's stance that the Cheonan sinking was instigated by the North has not changed.
"However, what's important are efforts to create actual peace on the Korean peninsula so these kind of provocations don't occur again," said Baik, adding the government would make "various efforts" to assuage the public's concerns.