Wall Street cheered Yellen's comments on future rate hikes as major indexes closed higher, with the Dow closing up 0.57 percent, or 123.07, at a record 21,532.14. However, on reflection, the market has considered there will be at least one more hike in the Fed Interest rate in 2017 and 3 in 2018, and for the time being has sold the United States dollars.
"Yellen still expects the balance sheet normalisation process to begin this year but this is anticipated to be a very slow process", O'Loughlin added.
Yields of the benchmark 10-year U.S. Treasury fell from around 2.35 percent to 2.31 percent during Yellen's testimony. The euro was little changed against the dollar after falling sharply on Wednesday.
The comments were part of Yellen's bi-annual report to Congress, where she faced tough questions from legislators.
The yen weakened 0.1 per cent to 113.43 per USA dollar as of 9:20am in Tokyo. The Aussie was on track to rise 1.7 per cent on the week, lifted by an improvement in broader investor risk appetite thanks to hopes for a more gradual tightening schedule by the Fed and rise in prices of commodities, notably iron ore. This is unfortunate news for the dollar after having a four-month high.
"That's why you have not seen much in the way of additional follow through in dollar demand".
She further said that the favourable financial environment, along with the prospects for further gains in local as well as global spending and the current revival of drilling activity, should continuously support the business investments.
Among oil stocks, Santos is rising 0.7 percent, while Oil Search and Woodside Petroleum are advancing more than 1 percent each after crude oil prices advanced more than 1 percent overnight. Crown Castle International rose $1.76, or 1.8 percent, to $100.05.
By 0740 GMT, the dollar index was trading 0.2 per cent lower at 95.588, having hit an 8-month low of 95.464.
The Fed has targeted a neutral interest rate level that neither encourages nor discourages economic activity, and has remained wary about the effect rate rises would have on relatively fragile growth.