* Dollar extends rally, up 0.3 percent against yen
* Templeton's Hasenstab calls recent yen strength "stifling"
* US ADP employment report, Chicago PMI awaited
By Jemima Kelly
LONDON, Aug 31 (Reuters) - The dollar rose to a one-month high against the yen on Wednesday on speculation the U.S. Federal Reserve would raise interest rates in the coming months.
The U.S. currency has gained almost 3 percent versus the yen since Friday, when Fed Chair Janet Yellen and Vice Chair Stanley Fischer kept open the possibility of a 2016 rate hike, perhaps as soon as September, at a meeting of central bankers in Jackson Hole, Wyoming.
Markets are pricing in around one chance in four of a September rate increase, compared with one chance in five before the Jackson Hole meeting. They are also pricing in a 55 percent chance of a hike by the end of the year.
Uncertainty over a rate increase had pushed the dollar as low as 99.550 yen earlier in the month. On Wednesday, it gained a third of a percent on the day to trade at 103.335 yen, its strongest since July 29.
"Heading into Jackson Hole, the market was very short dollars ... in contrast with the yen, where the market was net long," said BNP Paribas currency strategist Sam Lynton-Brown, from London. "That's very consistent with the price action that we're seeing: that dollar/yen is the dollar pair that is exhibiting the greatest sensitivity to Jackson Hole."
The U.S. currency's gains against the yen supported the dollar index, which was trading at 96.048, having risen around 1.5 percent since Friday. The yen was also dogged by recent weak Japanese data, which has added to speculation that the Bank of Japan will ease policy aggressively next month.
Franklin Templeton's Michael Hasenstab said on Wednesday it was time to sell the yen, adding that the recent strength in the yen was "stifling" the Japanese economy.
"In our view, the Japanese economy and policymakers will likely find it very difficult to deal with the yen at these inflated levels, so the massive yen rally appears tenuous to us and poised for a reversal," Hasenstab said.
Upbeat U.S. data released on Tuesday helped the dollar extend gains, with a consumer confidence index rising to an 11-month high in August. Other data showed that U.S. house price growth moderated in June but remained strong.
Focus is now on Friday's U.S. August non-farm payrolls report, which should indicate whether the U.S. economy is robust enough to withstand monetary tightening. But investors will first digest ADP employment data and the Chicago purchasing managers' index due later on Wednesday. (additional reporting by Anirban Nag; Editing by Larry King)