Janet Yellen, nominated as the next Federal Reserve chief, poses a clear risk to the U.S. dollar outlook as her dovish stance could push out expectations for a scaling back of the Fed's monetary stimulus, analysts say.
In a statement released ahead of Yellen's confirmation hearing before the Senate Banking Committee on Thursday, she conveyed a dovish tone. While she noted that the U.S. economy had made progress, she also voiced her concern over the unemployment rate being too high at 7.3 percent and said inflation remained below the Fed's 2 percent target.
(Read More: Could Fed's Yellen sound like a hawk?)
Analysts said her dovish stance should keep pressure on the greenback, but her performance under questioning could provide some volatility.
"The market has been adrift lately, and probably drifted too far towards fearing tighter U.S. policy. I think we are going to drift the other way now and we will see weakness in the U.S. dollar to replace its strength seen over the last two weeks," said Greg Gibbs, currency strategist at Royal Bank of Scotland.
The dollar index, which measures the greenback's value against other major currencies, slipped 0.5 percent on Wednesday to 80.793, following near three weeks of renewed strength.