Yellen's speech cited persistent labor market slack but noted faster recovery in the sector could accelerate the timing of a Fed interest rate hike.» Read More
The dollar rose against a basket of currencies on Wednesday, after the Fed announced it will cut its asset buying program by another $10 billion.
Fears over Ukraine unrest and an upcoming slew of US data are also pushing some currencies slightly down against the dollar.
With the resurgent greenback set to react further to economic data coming from the U.S., many analysts have argued that sterling has reached a tipping point.
The dollar fell slightly against the euro ahead of Wednesday's release of US gross domestic product growth and a Fed policy announcement.
The euro struggled to hold above eight-month lows against the dollar on Friday, hurt by a dive in Germany's Ifo survey of business sentiment.
The euro climbed from an eight-month low on Thursday after German and French business activity beat expectations.
The euro's resolve could be starting to crack, as it cleared "psychologically significant" barriers, according to strategists.
The euro hit an eight-month low against the dollar on Wednesday as worries drove investors away from the single currency.
The U.S. dollar turned flat against the euro, giving up earlier gains which drove the European currency to an eight-month low.
LONDON, July 22- The Australian dollar rose on Tuesday, the main mover on developed world currency markets, after the country's central bank chief said he was happy with current interest rate levels and made no attempt to talk down the currency.
The euro regained ground on the dollar, but trading was not energetic thanks to a holiday in Japan and geopolitical tensions.
The yen hit a five-month high versus the euro - and held some of its gains against the dollar - as investors saw the currency as a safe haven.
The yen hit a five-month high against the euro on renewed safe-haven inflows as the West imposed further sanctions against Russia.
Greg Gibbs, Senior Currency Strategist at RBS, says the Australian dollar fell on Wednesday because investors are focusing on tightening credit conditions in China rather than upbeat data.
The dollar clung to gains after bulls latched onto a comment by the head of the Fed that rates could rise sooner if employment continued to improve.
The yen eased on Tuesday after the Bank of Japan's growth warning, but it stopped short of hinting at a new bout of money-printing.
Keagan York, Head of FX Strategy, Compass Global Markets, expects investors to continue buying into the Aussie dollar which may strengthen to $0.95 to $0.97 against the U.S. dollar next year.
Boris Schlossberg, Managing Director of BK Asset Management, says the Aussie dollar may fall to 91 cents against the greenback if China's second quarter growth report disappoints.
The dollar was steady as investors awaited pivotal events, including Fed Chair Janet Yellen's congressional testimony, for fresh cues.
The yen was near a five-month peak against the euro as banking woes in Portugal drove equities lower and lifted demand for the safe-haven currency.