* Dollar index rises towards 12-day high
* Yellen eyed after hawkish comments from Fed officials
* Yen underperforms amid prospects for more stimulus (adds details, quote)
By Anirban Nag
LONDON, March 29 (Reuters) - The dollar rose against the yen on Tuesday, with the focus on a speech by Federal Reserve chair Janet Yellen who could give clues on when interest rates could be hiked later this year.
The dollar index was steady at 95.961, not far from Monday’s peak of 96.399, its highest since March 16. The dollar was up 0.2 percent against the yen at 113.70 yen, while it was slightly lower against the euro at $1.12.
The outlook on the dollar - which turned firmer last week in large part due to a series of hawkish comments from Fed officials - will depend on what Yellen says at a speech to the Economic Club of New York. She is due to speak on the economic outlook and monetary policy at 1620 GMT on Tuesday.
“After the optimistic comments we had from other Fed officials in the recent past, we expect Yellen to be more balanced compared to a very dovish Fed statement,” said Yujiro Gato, currency strategist at Nomura. “Clearly that will be a driver for the dollar today.”
San Francisco Federal Reserve President John Williams said on Tuesday there is some upside risk that inflation could hit the Fed’s target sooner, but more data is needed to make a convincing assessment. In a speech earlier, he said recent data reinforced his expectation that inflation is on track to move back to 2 percent over the next two years.
The dollar had come under pressure in thin trading conditions on Monday after soft U.S. consumer spending prompted economists to cut estimates for first-quarter gross domestic product growth.
The soft data dimmed prospects for an imminent hike in U.S. rates, which some Federal Reserve officials last week said could be as early as next month if the economy maintained its momentum. But the consensus is the U.S. economy is growing at a steady pace and a hike is likely in June or July.
Dollar bulls preferred to await Yellen’s speech, having been hurt previously when the Fed trimmed its rate path and forecast only two rate hikes in 2016, compared with four previously.
“If Yellen does once again push back on any signs of urgency for the Fed to deliver their next hike, this may once again test how much the market wants to keep priced into the next few meetings, with 38 percent priced for June and 50 percent for July,” said Ned Rumpeltin, currency strategist at TD Securities.
The yen, meanwhile, underperformed, falling 0.25 percent against the euro.
Traders said speculation of more stimulus and talk that Japanese Prime Minister Shinzo Abe will delay an unpopular sales tax hike and call a snap election appeared to be keeping the yen under pressure.
Abe said on Tuesday that he would instruct his government to front-load spending earmarked in the fiscal 2016 budget as much as possible to spur growth and denied plans to delay the sales tax hike. (Additional reporting by Shinichi Saoshiro; Editing by Mark Potter and Raissa Kasolowsky)