The Japanese yen weakened sharply in early Asian trade on Monday along with the Australian dollar as the market digested weekend comments from the Federal Reserve chief suggesting an interest rate hike may happen sooner than expected.

USD/JPY traded at 104.22, up 0.26%, while AUD/USD traded at 0.9298, down 0.19%. EUR/USD traded at 1.3196, down 0.33% and USD/CHF rose to 0.9170, up 0.35%. There are no major data releases due in Asia on Monday.

Markets took note of what transpired at the weekend as Janet Yellen opened the Kansas City Federal Reserve annual symposium in Jackson Hole, Wyoming, with the observation that conditions in labor markets have outperformed Fed forecasts--and that if this continues the Fed funds target rate could rise earlier and more rapidly than expected.

That is a change of emphasis from the Fed chairwoman.

European Central Bank President Mario Draghi told the Jackson Hole gathering that the central bank is ready to take more unconventional action if needed to stimulate a sluggish euro zone economy.

Last week, the U.S. dollar rallied to the highest level in more than 11-months on Friday following the Yellen remarks.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, traded at 82.61, up 0.28%.

On Friday the index hit 82.51, the highest since Sept. 6, 2013. It ended the week at 82.38.

Tensions over the crisis in Ukraine remained in focus after NATO said it was observing an alarming increase in Russian forces near the border with Ukraine.

Ukraine declared on Friday that Russia had launched a "direct invasion" of its territory after Moscow sent a convoy of aid trucks across the border into eastern Ukraine where pro-Russian rebels are fighting government forces.

In the week ahead, investors will be looking ahead to key U.S. data for further indications on the strength of the economy and the possible future path of monetary policy.

The U.S. will produce data on second quarter gross domestic product, as well as reports on new home sales, durable goods orders and initial jobless claims.

On Monday, Germany is to publish the Ifo report on business climate for August.

Markets in the U.K. are to remain closed in observance of the Summer Bank Holiday.

The U.S. is to produce data on new home sales for the month of July.

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