The Japanese yen dropped against its major counterparts in the Asian session on Thursday, amid higher U.S. treasury yields and growing monetary policy divergence between the U.S. Federal Reserve and the Bank of Japan.

The dollar index rose on expectations that the Federal Reserve will continue to raise rates aggressively to tackle high inflation.

The Fed is expected to deliver a third consecutive 75 basis-point rate hike when it meets next week.

Fed funds futures suggest a 28 percent chance of a 100 basis-point rate hike following strong U.S. inflation data for August.

In contrast, the BoJ is committed to maintain an ultra-loose monetary policy in a bid to support the economy.

The yen weakened to 143.80 against the greenback and 165.73 against the pound, from its previous highs of 142.79 and 164.80, respectively. The yen is poised to challenge support around 148.00 against the greenback and 172.00 against the pound.

The yen dropped to 149.27 against the franc and 143.45 against the euro, off its early highs of 148.46 and 142.56, respectively. Next key support for the yen is likely seen around 152.00 against the franc and 145.00 against the euro.

The yen edged down to 109.17 against the loonie, 86.36 against the kiwi and 97.13 against the aussie, after rising to 108.48, 85.82 and 96.41, respectively in prior deals. Immediate support for the yen is possibly seen around 113.00 against the loonie, 91.00 against the kiwi and 102.00 against the aussie.

Looking ahead, at 8:15 am ET, Canada housing starts for August are scheduled for release.

U.S. retail sales, import and export prices and industrial production, all for August, as well as weekly jobless claims for the week ended September 10, business inventories for July and New York Fed's empire manufacturing survey for September will be out in the New York session.

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