* Conflict in Iraq stoke safety bids for yen, Swiss franc
* Russia-Ukraine gas dispute adds safe-haven demand
* Euro recovers from four-month lows vs yen
* Sterling above $1.70 vs dollar for first time in 5 years (Updates market action, changes dateline, previous LONDON)
By Richard Leong
NEW YORK, June 16 (Reuters) - The yen and the Swiss franc rose on Monday, with the Japanese currency hitting a four-month high against the euro, as investors sought safety from Iraq’s worsening conflict and a gas dispute between Russia and Ukraine.
Sterling climbed above $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 slipped as traders await for clues from the U.S. Federal Reserve on the timing of an interest rate increase amid doubts about the economic recovery.
“You have the geopolitical unrest and there are questions about the U.S. recovery,” Alfonso Esparza, senior currency strategist at Oanda in Toronto said of the factors behind the safe-haven bids for yen and Swiss franc.
The dollar fell 0.23 percent to 101.82 yen at the low of the month’s trading range, while the euro fell to a four-month low against the yen earlier before paring much of its decline, last at 138.08 yen in U.S. trading.
Over the week, Sunni Islamist fighters solidified their grip on northern Iraq in a bid to overturn the Shi‘ite government.
On Monday, Russia cut off gas to Ukraine in a dispute over unpaid bills that could disrupt supplies to the rest of Europe.
The dollar and euro were also weaker against the Swiss franc, another safe-haven currency, trading at 0.8975 francs and 1.2714 francs respectively.
Rising oil prices due to geopolitical tension could hamper global growth and may curb U.S. central bankers from considering to raise interest rates too soon.
Analysts anticipate the Fed policymakers, who will meet on Tuesday and Wednesday, will tighten policy about a year from now. The greenback should rise from such signals from the Fed.
“We expect the Fed to keep withdrawing monetary stimulus and we are positive on the dollar in the medium term,” said Geoff Yu, currency analyst at UBS in London.
But the dollar fell against major currencies on the day.
The euro rose 0.16 percent to $1.3565, not far from a four-month trough of $1.3503 earlier this month when the European Central Bank eased monetary policy.
Sterling hit a peak of $1.7011, its highest since August 2009 before easing to $1.6986 in U.S. trading.
Bank of England Governor Mark Carney said on Thursday U.K. rates might rise sooner than traders expect, spurring bets the BoE may tighten policy before year-end. The pound rose further on comments from BoE policymaker Charlie Bean, who said on Sunday he would welcome the bank’s beginning to “normalise” rates.
The euro fell to as low as 79.59 pence, a trough not seen since October 2012 before bouncing up to 79.65 pence. (Additional reporting by Anirban Nag in London; Editing by Larry King and Nick Zieminski)