* Aussie, sterling gains against yen as volatility dips
* U.S. inflation data seen key event risk in session.
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, July 14 (Reuters) - The Japanese yen remained on the back foot against high-yielding currencies such as the Australian dollar on Friday after dovish comments from major policymakers this week reaffirmed market expectations that interest rates will rise very slowly.
"It is broadly a U.S. dollar-negative market as latest comments from Yellen and others suggest that interest rates will rise very gently and that is supportive for high-yielding currencies for now," said Viraj Patel, an FX strategist at ING Bank in London.
The Aussie and sterling were among the best performing currencies, especially against the Japanese yen.
Against the yen, the Australian dollar rose 0.23 percent and sterling climbed 0.31 percent, with a relatively upbeat outlook from Fitch Ratings on China also supporting risk sentiment.
Major market gauges of asset volatility, such as the Merrill Lynch Option volatility estimate and VIX, drifted lower on Friday, providing a boost to carry trades.
The U.S. currency's recent advance, notably against the yen , has stalled towards the end of this week after Federal Reserve Chair Janet Yellen curbed some of the monetary tightening expectations that had supported the greenback. That view was further reinforced by other U.S. policymakers such as Dallas Federal Reserve Bank President Robert Kalpan on Thursday, though analysts were wary of kicking the dollar lower before U.S. inflation data.
Signs of a pick-up in U.S. inflation could reinforce views that the Fed would hike interest rates again sooner rather than later, which would lift Treasury yields and the dollar.
However, the core consumer price index (CPI) is forecast to have risen only 1.7 percent year-on-year in June after a similar gain in May. On a month-on-month basis, the core CPI is expected to rise 0.2 percent after a 0.1 percent gain the previous month.
The euro was little changed at $1.1407, unable to find much lift even as Germany's 10-year bond yield climbed back above the 0.50 percent threshold overnight. That followed a report that the European Central Bank is likely to signal in September that its asset purchase programme will be gradually wound down next year.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Additional reporting by Shinichi Saoshiro in TOKYO; Editing by Catherine Evans)