FOREX-Dollar hits 12-1/2-yr high vs yen; euro rises on Greece hopes

* USD touches 124.30 yen, highest level since December 2002

* Traders are wary of verbal intervention from Japanese officials

* Euro higher

By Jemima Kelly

LONDON, May 28 (Reuters) - The dollar hit a 12-1/2-year high against the yen on Thursday, as investors bet that U.S. interest rates will rise later this year while monetary policy will remain ultra-loose in Japan.

The greenback soared as high as 124.30 yen, as a rise in Tokyo stocks also helped to boost risk appetite and hurt the safe-haven yen, which has been under pressure from the Bank of Japan's aggressive monetary stimulus since 2013.

Against the euro, the dollar weakened by 0.4 percent to $1.0948 after European Central Bank Governing Council member Ewald Nowotny said negative interest rates did not constitute a "normal element of an economy" and would not persist in the long term.

The single currency was also given a boost by tentative signs that cash-strapped Greece may be nearing a deal to secure fresh funding before a loan to the International Monetary Fund falls due on June 5.

Greece and its international creditors have converged on key points on a cash-for-reforms deal but talks still have some room to cover before an agreement is clinched, the country's economy minister said early on Thursday.

"The market clearly doesn't think that the June 5 deadline really is a deadline, and I think we're drifiting further in that direction," said Adam Cole, global head of FX strategy at RBC Capital Markets. "So that's diminishing the risk premium in the euro and propping it up as a result."

Against a basket of major currencies of which the euro is the biggest component, the dollar edged down 0.2 percent, pulling away from a five-week high hit on Wednesday.

"Macro (Shenzhen: 000533.SZ - news) funds betting on a September Fed rate hike have increased their long exposure to the dollar, which was the main driving force behind the rise this week," said Yunosuke Ikeda, head of FX strategy at Nomura Securities, which has many hedge fund clients.

"Longer-term, little stands in the way of further yen losses," said Greg Moore, senior currency strategist at RBC (Other OTC: RBCI - news) .

But traders added that players are now wary of potential verbal intervention by Japanese officials to steady the yen. On Wednesday, Japanese policymakers cautioned markets against pushing the yen down too rapidly.

The dollar last traded a touch higher on the day at 123.685 yen. It is on track for its best month since November, gaining almost 4 percent since the start of May.

Among commodity currencies, the Australian dollar skidded more than half a U.S. cent after weaker-than-expected business investment figures fuelled expectations for more easing by the Reserve Bank of Australia. The Aussie fell to $0.7671, its lowest in six weeks. (Additional reporting by Tomo Uetake in Tokyo and Ian Chua in Sydney)