* Dollar/yen dips as Tokyo shares slip on Iraq conflict
* Euro struggles vs dollar near 4-month low
* Sterling above $1.70 vs dollar for first time in 5 years (Recasts, adds quote, details)
By Anirban Nag
LONDON, June 16 The yen and the Swiss franc rose on Monday, with the Japanese currency trading near a four-month high against the euro as investors sought a safe haven amid escalating conflict in Iraq.
Sterling, meanwhile, hit five-year highs against the dollar , rising above option barriers at $1.70, with investors betting that the Bank of England will tighten monetary policy before the end of the year.
The dollar fell 0.2 percent to 101.80 yen, moving towards the bottom of its relatively tight 102.80-101.60 yen range seen so far this month. The euro was down 0.2 percent at 137.73, not far from its four-month low of 137.705 yen struck last week.
The yen was boosted by falling stocks. It has an inverse relation with riskier assets like shares, especially Tokyo's Nikkei index. The Tokyo index shed 1 percent as the insurgency in Iraq escalated, raising concerns over oil exports from OPEC's second-largest producer.
"The subdued risk sentiment and concerns about effects of rising tensions in Iraq on oil prices and pro-cyclical assets, have kept the yen bid," said Petr Krpata, analyst at ING.
"With sentiment unlikely to change materially today, we see modest downside risk to dollar/yen but expect the 101.60 support to hold."
The dollar and the euro were both weaker against the Swiss franc, another safe-haven currency, trading at 0.8995 francs and 1.2180 respectively.
Other safe-haven assets like gold also gained on Monday while oil prices surged as Sunni insurgents solidified their grip on the north after a lightning offensive that threatens to dismember Iraq.
Rising oil prices could hamper global growth prospects and the latest geopolitical developments are likely to figure in the Federal Reserve's latest policy meeting scheduled this week.
Currently, expectations are for the Fed to begin raising rates about a year from now, and the dollar is seen benefiting from any hawkish comments by the central bank.
"Key points are if Fed Chair (Janet) Yellen upgrades her view on the economic view in light of recent economic indicators and if the central bank raises its yield forecast, which would reignite expectations for earlier rate hikes," said Junichi Ishikawa, market strategist at IG Securities in Tokyo.
"Whether geopolitical risks have any currency impact depends on how the situation in Iraq and Ukraine impacts the equity markets, but so far their reaction appears limited," he said.
The euro traded 0.2 percent lower at $1.35155, within sight of a four-month trough of $1.3503 hit earlier this month when the European Central Bank eased monetary policy.
Sterling, which has been boosted by a hawkish approach taken by the BoE, hit a peak of $1.7011, its highest since August 2009. Governor Mark Carney had said on Thursday that rates could rise sooner than financial markets expect, in a surprisingly stark warning that policy may start to tighten before year end.
The euro fell to as low as 79.64 pence, a trough not seen since November 2012. (Additional reporting by Shinichi Saochiro in Tokyo; Editing by Hugh Lawson)