* Greek worries hurt euro; dollar, yen gain on risk aversion
* Yen pares gains after Japan lawmaker says should intervene
* Sterling hit by political uncertainty; Aussie falls
(Updates prices, adds quotes)
By Jessica Mortimer
LONDON, April 16 (Reuters) - The euro fell on Friday on concerns about how Greece will service its debt, while the dollar and the yen gained as falls in equity markets led investors to cut positions in riskier currencies.
The Japanese currency pared gains, however, after a lawmaker from Japan's ruling party said monetary easing and intervention to weaken the yen were needed to beat deflation. [ID:nTKF106921]
Greece asked on Thursday for talks with European authorities and the International Monetary Fund, a step toward Athens obtaining support via an aid plan agreed last weekend. [ID:nLDE63E0HN]
Concerns remain about how the deal will work in practice, however, and the premium demanded to buy Greek government bonds rather than German bonds rose further. [GVD/EUR]
"Euro/dollar is still very much a function of the Greece issue and fundamentally the Greece story does argue for a weaker euro, although the technical picture remains bullish until we get a close below $1.35," said Tom Levinson, currency strategist at ING.
At 1020 GMT, the euro was down 0.4 percent against the dollar at $1.3522 <EUR=>, off an earlier one-week low of $1.3515.
The $1.3500 level is seen as key because it marks the peak reached last Friday before the single currency gapped higher after the weekend in response to the agreement on terms of the Greek bailout deal.
The dollar index <.DXY>, which tracks the greenback versus a basket of major currencies, rose 0.2 percent to 80.700, recovering from a four-week low of 80.031 hit on Wednesday. It faces some resistance in the 80.75 area, traders said.
The dollar was helped by global shares <.MIWD00000PUS> softening 0.3 percent after a recent strong run, but it gave back some of its gains as the U.S. two-year Treasury yields <US2YT=RR> fell below 1 percent. [US/]
"U.S. yields below 1 percent is likely to feed through into the idea that the Fed will retain its stance that rates will remain low for some time," Levinson said.
Top U.S. Federal Reserve officials showed little urgency on Thursday about softening the central bank's commitment to hold rates low for a long time, suggesting the Fed will repeat the pledge when it meets later this month. [ID:nN15121238]
YEN PARES GAINS
Against the yen, the euro fell 0.5 percent to 125.65 yen <EURJPY=R>, though it was below the day's high of 126.42. The dollar <JPY=> erased earlier losses to trade flat at 93.00 yen after the Japanese lawmaker's comments.
"(The comments) have got the market a bit jittery. It looks like we could be moving back to the old road of needing to weaken the yen," said David Bloom, global head of currency research at HSBC in London.
Traders said stop loss orders for the dollar were thought to be placed from 92.50 yen down to 92.20 yen.
Sterling fell on concerns a May 6 UK election may result in no one party winning a majority, as polls showed the heads of the two main parties were beaten in a TV debate by the leader of the third party, the Liberal Democrats. [ID:nLAC005697].
Sterling fell 0.3 percent against the dollar <GBP=D4> to $1.5450, while risk aversion pushed the higher-yielding Australian dollar down 0.2 percent to $0.9327 <AUD=D4>.
(Additional reporting by Neal Armstrong)