* European, Asian stocks kick off week on firm footing
* Dollar at two-month peaks vs yen
* Risk appetite supported by Friday's robust US jobs data
* Germany export data also stronger-than-expected
* Focus turns to Yellen testimony, Bank of Canada meeting
* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh (Updates throughout)
By Dhara Ranasinghe
LONDON, July 10 (Reuters) - Stock markets rallied on Monday and the U.S. dollar hit a two-month high against the yen, as robust economic data from the United States and Germany left investors increasingly confident about the strength of the world economy.
Focus also turned to Federal Reserve chief Janet Yellen's semi-annual testimony on monetary policy and a meeting of Canada's central bank on Wednesday for the latest signals on policy from major central banks.
For now, unease about an end to an era of ultra-cheap money has given way to optimism about global growth, with Friday's stronger-than-expected U.S. non-farm payrolls report bolstering risk appetite. Data on Monday showed exports from Germany, Europe's biggest economy, rose more than expected in May pan-European STOXX 600 .STOXX rallied 0.4 percent, with banks and utilities the strongest sectors. Blue-chip stock markets in London .FTSE , Paris .FCHI and Frankfurt .GDAXI climbed 0.2 to 0.5 percent. .EU
They followed gains in Asia, where MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.3 percent and Japan's Nikkei .N225 gained 0.8 percent to a one-week high, helped by weakness in the Japanese currency.
MSCI's emerging markets benchmark .MSCIEF posted its best day in two weeks. U.S. stock futures ESc1 1YMc1 were largely flat after strong gains on Wall Street on Friday.
"Stocks have opened higher at the start of this week, the dollar continues to bask in the glory of the stronger-than-expected non-farm payrolls data, and U.S. bond yields are approaching the key 2.4 percent level," said Kathleen Brooks, research director with City Index in London.
"This week is shaping up to be a critical one for data releases, central bank speak and earnings releases, and it could all add up to an important director of asset prices throughout the summer months."
The dollar rose almost 0.4 percent to 114.29 yen JPY=D4 , a two-month peak, while the dollar index - which measures the dollar's value against a basket of other major currencies - was a touch firmer at 96.142 .DXY . The euro was softer at $1.1388 EUR= .
Oil prices declined, extending losses at the end of last week on the back of high drilling activity in the United States and ample supplies from OPEC and non-OPEC nations.
Brent crude futures LCOc1 , the international benchmark for oil prices, were at $46.27 per barrel, down 50 cents, or around 1 percent, from their last close. BANKS IN SPOTLIGHT
A generally more hawkish tone from the European Central Bank, Bank of England and Bank of Canada in the past two weeks have boosted market expectations that central bank policy is at a turning point. The U.S. Federal Reserve has lifted rates twice this year and is seen tightening again by the end of the year.
The Bank of Japan on Monday offered its most optimistic view of the country's regional economies in more than a decade on solid exports and private consumption, underscoring its conviction a steady recovery is gathering momentum. BOJ Governor Haruhiko Kuroda reiterated his resolve to maintain ultra-loose monetary policy until inflation is stably above its 2 percent target.
"Unlike in recent years, where there was very patchy growth across the world, we are seeing a synchronized upswing in the global economy," said Alex Dryden, global market strategist at JP Morgan Asset Management.
"So while it may not be coordinated communication, I do think there's been a change in rhetoric from central banks across the world -- though the ECB is the central bank to watch in the second half of the year."
The brighter economic outlook and expectations for tighter monetary policies pushed gold prices to their lowest since mid-March at $1,204.45 an ounce XAU= . expect the Bank of Canada to raise interest rates on Wednesday. Such a move would be its first increase in nearly seven years Group of 20 meeting in Hamburg over the weekend did not have much impact on markets on Monday