FOREX NEW YORK COMPANIES

* Yen off highs, market becoming wary of intervention

* Japan threatens action vs yen rise (Recasts, adds quote, changes dateline PVS SINGAPORE)

By Anirban Nag

LONDON, June 1 (Reuters) - The euro was near a two-year low against the dollar on Friday and stayed close to its lowest in more than a decade versus the yen on growing uncertainty about how Spain will recapitalise its ailing banking sector and fix its public finances.

Japan said the yen's strength was being driven by speculators and stepped up warnings that it could intervene to curb the currency's rise, saying it would act decisively if excessive market moves continued.

The euro fell to as low as $1.2324 on trading platform EBS at one point, its weakest since July 2010. It last fetched $1.2345, down 0.1 percent on the day, with a drop towards $1.20 likely as bears remain firmly in control.

The drop in the common currency came as Spaniards sent money abroad in droves, worried about the health of the banking system. Bank of Spain data showed a net 66.2 billion euros ($82.0 billion) was sent abroad in March, the most since records began in 1990.

"It is looking very bearish for the euro with the latest capital flows data showing a significant amount leaving Spanish banks, all of which indicate they will probably need official help," said Peter Kinsella, currency strategist at Commerzbank.

Any help from the European rescue fund for Spain would mean an additional tax burden on Germany, Europe's paymaster, and could hurt the safe-haven status of German bunds, he added.

"It is not a situation where there is much help for the euro and chances are it is headed towards $1.20."

With German two-year yields near zero, traders said a lot of safe-haven flows have, so far, stayed within the single currency area. But if that were to change, the euro's decline against the dollar and the yen could accelerate considerably.

The euro's selloff has gained steam this week as Spain's borrowing costs surged on worries it may need to issue more debt to recapitalise its banks, adding stress to markets already frayed by anxiety that Greece may exit the euro zone.

The rising borrowing costs risk pushing Spain towards an international bailout. The yield spread between Spanish 10-year government bonds and German Bunds have risen to euro-era highs this week, and the euro has fallen almost in lock step with that move.

"We're looking for $1.18 by the end of Q3, and at this rate, it could happen before that," said Callum Henderson, global head of FX research for Standard Chartered Bank in Singapore.

"During this risk-off environment, the U.S. dollar is the only place to be," he added.

YEN INTERVENTION JITTERS

Apart from the dollar, the safe-haven yen has also been in demand. The euro was steady against the yen at 96.90 yen , not far from an 11-1/2-year low of 96.48 yen struck the previous day.

On Thursday, the euro got a brief lift after The Wall Street Journal said the International Monetary Fund was discussing a contingency plan for a rescue loan to bail out Spain's third largest bank. The report, however, was specifically refuted by IMF Managing Director Christine Lagarde.

The euro may not get much respite even if Spain gets an international bailout, said Standard Chartered's Henderson.

"If Spain had to be bailed out, the market would instantly focus its attention on Italy. Current European Union and IMF resources cannot fund bailouts of both Spain and Italy," he said.

So the risk of contagion will support the safe-haven yen. The Japanese currency's broad surge this week, including its rise to a 3-1/2-month high versus the dollar, are making market players wary about the potential for Japanese yen-selling intervention, traders say.

Japanese Finance Minister Jun Azumi said Japan would act if excessive yen strength continued while the country's top currency diplomat signalled Japan was willing to act alone as it was becoming clear that yen rises were being driven by speculators.

The dollar edged up 0.1 percent to 78.46 yen but remained close to Thursday's low of 78.21 yen, the dollar's lowest level against the yen since mid-February.

A fall in the 10-year U.S. Treasury yield to a record low this week has cut the yield advantage of Treasuries over Japanese government bonds, and has helped drag the dollar lower against the yen.

Traders say the dollar could come under renewed pressure against the yen if U.S. jobs data due on Friday comes in weak. The data is expected to show U.S. employers created 150,000 jobs in May. (Additional reporting by Masayuki Kitano in Singapore; Editing by Susan Fenton)