* USD lifted as Yellen says near-term hike "would be appropriate"
* Dollar index hits 2-month high, euro sets 2-1/2-mth low
* Yen sags on prospects for delay in Japan's sales tax hike
* Dollar hits 1-month high above 111.00 yen (Updates prices, adds comment)
By Shinichi Saoshiro and Masayuki Kitano
TOKYO/SINGAPORE, May 30 (Reuters) - The dollar hit a one-month high against the yen on Monday and stood tall against other peers after comments by Federal Reserve Chair Janet Yellen enhanced the prospects of a near-term U.S. interest rate hike.
In addition to the latest round of hawkish-sounding comments from Yellen, political developments in Tokyo were also seen supporting the dollar against the yen.
Japanese Prime Minister Shinzo Abe said he would delay a sales tax hike scheduled for next April by two and a half years, a senior ruling party official said after a meeting with the premier on Monday. is also seen compiling a supplementary budget to boost the sputtering economy, a move which is widely expected to be followed by further monetary easing by the Bank of Japan.
The greenback poked above 111.00 yen for the first time since late April, reaching 111.03 yen at one point, and was last up 0.5 percent at 110.97 yen JPY= .
"Fiscal policy is positive for the yen, but if the stimulus is accompanied further monetary easing, then it is a yen-weakening factor as brings the concept of 'helicopter money' to mind," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.
While a delay in the sales tax hike could shield the floundering economy from a tax shock, it means less income for the cash-strapped government, possibly prompting credit rating agencies to downgrade Japan's sovereign rating.
"A potential credit downgrade will also hurt the yen, so the recent developments would be negative for the yen overall," Yamamoto said.
The dollar stood tall after the Fed chair said on Friday a rate increase in the coming months "would be appropriate," if the economy and labour market continued to improve. rate hike endorsement was just what the currency market was looking for to take the already-bullish dollar yet higher after a recent run of upbeat U.S. economic indicators and comments from top Fed officials that supported a near-term tightening.
The euro touched a 2-1/2 month low of $1.1097 EUR= on Monday and last traded at $1.1104, down 0.1 percent.
The dollar index hit a peak of 95.940 .DXY =USD , its highest in two months.
The yen fell broadly, with the euro gaining 0.6 percent to 123.20 yen EURJPY=R and the Australian dollar rising 0.5 percent to 79.52 yen AUDJPY=R .
The prospects for a delay of Japan's sales tax hike helped support Japanese equities and added to pressure on the safe haven yen, market participants said.
One uncertainty, however, is how markets would react if a postponement of Japan's sales tax hike were to lead to a downgrade of Japan's sovereign rating.
"What would be scary is if there were to be a downgrade. I think equities would fall if that happens. That remains a risk," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
A sovereign downgrade could be negative for Tokyo equities as it could have adverse knock-on effects that push up the fund-raising costs of Japanese firms and financial institutions, Okagawa added.
Elsewhere, the Australian dollar was on the back foot against a buoyant dollar. The Aussie eased 0.2 percent to $0.7171 AUD=D4 , after touching a low of $0.7148 at one point on Monday. A drop below $0.7145 would take the Australian dollar to a three-month low.