* Dollar/yen dips as Tokyo shares slip on Iraq conflict
* Euro struggles vs yen, hits four-month low
* Sterling above $1.70 vs dollar for first time in 5 years (Adds quote, details)
By Anirban Nag
LONDON, June 16 The yen and the Swiss franc rose on Monday, with the Japanese currency hitting a four-month high against the euro, as investors sought a safe haven from escalating conflict in Iraq.
Sterling, meanwhile, rose past $1.70 against the dollar for the first time in nearly five years, with investors betting that the Bank of England will tighten monetary policy before the end of the year.
The dollar fell 0.25 percent to 101.80 yen, towards the bottom of the 102.80-101.60-yen range seen so far this month. The euro was down 0.2 percent at 137.85, having hit a four-month low of 137.70 yen on trading platform EBS earlier in the European session.
The yen was boosted by falling stocks. Japan's currency 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 concern 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 0.8990 francs and 1.2177 respectively.
Other havens like gold also gained on Monday and oil prices surged as Sunni insurgents solidified their grip on the north, after a lightning offensive that threatens to dismember Iraq.
FED AND DOLLAR FOCUS
Rising oil prices could hamper global growth and the geopolitical developments are likely to figure in the Federal Reserve's latest policy meeting, scheduled for 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.
"Unless we have a huge move upward in oil prices, we do not think that the Fed will be too worried about the geopolitical situation," said Geoff Yu, currency analyst at UBS. "We expect the Fed to keep withdrawing monetary stimulus and we are positive on the dollar in the medium term."
The euro was flat at $1.3540, not far from a four-month trough of $1.3503 hit earlier this month when the European Central Bank eased monetary policy.
Sterling hit a peak of $1.7011, its highest since August 2009. Bank of England Governor Mark Carney said on Thursday that rates might rise sooner than financial markets expect, in a surprisingly stark warning that policy may start to tighten before year's end.
The euro fell to as low as 79.59 pence, a trough not seen since October 2012. The pound was bolstered by comments from BoE policymaker Charlie Bean, who said on Sunday he was optimistic about the economy and would welcome the bank's beginning to "normalise" rates. (Editing by Larry King)
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