The Federal Open Market Committee will decide on a rate hike at its meeting March 14-15. Stocks edged slightly lower while gold ticked upward.
"But the dollar's downside was limited as Yellen and Fischer are expected to reiterate that an interest rate increase is imminent", an official at a major Japanese bank said.
In her speech, Yellen remarked that disappointing economic growth in 2015, due to weaker economic overseas, the lower price of oil, and the appreciation of the dollar, had all persuaded the Fed to proceed cautiously.
MARKETS OVERSEAS: In Europe, Germany's DAX was down 0.3 percent, while France's CAC 40 was 0.6 percent higher.
Stocks eked out fractional gains to cap a solid week that saw the Dow close 0.9% higher, the S&P rise by 0.7% and the Nasdaq add 0.4%.
Futures traders are now pricing in a 66 per cent chance of a Fed hike in March, up from 35 per cent on Tuesday, according to the CME Group's FedWatch Tool. The personal consumption expenditures price index, the Fed's favored measure of inflation, rose 1.9 percent in the 12 months ending in January, almost reaching the Fed's 2 percent inflation target.
Yellen did not directly address the likely impact of theTrump administration's economic policies in her remarks.
U.S. two-year Treasury yields jumped to 1.2999, their highest level since Dec 15, after New York Fed President William Dudley, among the most influential United States central bankers, said overnight on CNN that the case for tightening monetary policy "has become a lot more compelling" since Trump's election.
The dollar has benefited from this aggressive pricing and the index is now trading at 102, up more than 1 percent in the past seven days.
"Today was a "good Trump", compared to the aggressive "bad Trump" shown on Twitter", said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.
Japan led Asian stock markets higher, with the Nikkei up 1.4%.
The U.S. dollar jumped 0.79 per cent to mark its biggest one-day gain since December 15, while shares of Bank of America, Goldman Sachs and Citigroup rose about 2 per cent in premarket trading.
U.S. Treasury yields rose, with 2-year notes touching a fresh 7-1/2-year high and other maturities hit multiweek peaks after Yellen's speech.
The primary reason for EUR/USD's fall on Tuesday night and Wednesday was the increased strength of the US Dollar. But this week is looking a lot like a coordinated attempt by the Fed to put a March hike firmly on the table'. USA stocks recorded their worst day since January as investors paused to assess whether the recent rally has run too fast and too far.
Services activity in the US strengthened in February, according to the Institute for Supply Management. As for bonds, the yield on the 10-year Treasury, which trades inversely to prices, was little changed at 2.48%, though it has been on a gradual incline so far this year.
Federal agents raid Caterpillar offices
Caterpillar stock plunged almost 6 percent by 1 p.m., nearly an hour after news of the raids broke. To view the full article, register now. " Caterpillar is cooperating", it said.
Truck goes airborne to end wild chase
He had been in jail for auto theft and had escaped custody when ditching a work-release programme after finishing his shift. He led officers in a chase that ended when his truck hit some spike strips, swerved and then went airborne.