Opinion among market-watchers is divided on the tone Yellen would set in her speech, with some expecting that a hawkish tone could exert pressure on assets perceived to be risky.
"Traders are not going to be that much happy that easy money is leaving town, so we may see a sell-off for the equity market and for gold as well," Naeem Aslam, chief market analyst at ThinkMarkets, said.
A hawkish tone could also potentially suggest that a rate hike at the Fed's September meeting might be on the cards, which some investors welcomed. On Thursday, Beat Wittmann of Swiss investment advisory firm Porta Advisors told CNBC that a September Fed hike would provide a boost for the rest of the world and allow for a further hike this year.
But others suggested there was little to no possibility of the Fed raising rates before the U.S. presidential elections in November.
Kenneth Polcari, director at O'Neil Securities, told CNBC's "Squawk Box" that the earliest possibility of the Fed raising rates was in December, although he expects it might also happen after a new U.S. president in inaugurated in January 2017. He added that he didn't expect Yellen to say anything out of the ordinary in her Friday speech.
"She's going to keep the door open, she's going to continue to talk about the data, about how we're making slow and steady progress," Polcari said. "She's not going to say ever that rates are not going to go up in 2016, because that would be a huge admission of failure, considering all year long, they've been telling us that rates are going to go [higher]."
Mizuho Bank's senior economist Vishnu Varathan added in a Friday morning note that he expects Yellen's message to be one of "very gradual approach to a neutral rate that is likely to be significantly lower than is historically normal for the U.S.."
Varathan pegged that rate to be between 2.5 to 3 percent, depending on structural global conditions.
In the currency market, the dollar slipped against a basket of currencies, with the dollar index at 94.596, compared to its last close at 94.772.
The Japanese yen remained relatively flat against the dollar, close to the key 100 handle, trading at 100.45 as of 3:02 p.m. HK/SIN. Earlier, the yen strengthened from levels near 100.55 to as high as 100.35 after the government released its July inflation data.
Data from the country's Statistics Bureau showed Japan's core consumer prices, which excludes fresh food, fell 0.5 percent on-year in July, versus a Reuters forecast that expected a 0.4 percent decline. The so-called core-core consumer prices, which excludes food and energy items, rose 0.3 percent on-year in July, but fell 0.2 percent from the previous month.
The preliminary August core consumer prices in Tokyo, released a month in advance compared to the nationwide consumer prices, also fell 0.4 percent on-year.
The decline in consumer prices in Japan will likely put pressure on both the government and the Bank of Japan to do more in their bid to prop up growth in the country's moribund economy. In late July, Prime Minister Shinzo Abe had announced a government stimulus package worth 28 trillion yen ($265.30 billion), and in early August, the government approved 13.5 trillion yen in fiscal measures that included 7.5 trillion yen in spending by the national and local governments.
One fund manager told CNBC on Friday that while he is cautious about Japan in the short-term, he sees long-term optimism for the world's third largest economy.
"We need to focus on the fact that the central bank and the government are working closely together to tackle this problem," Masakazu Takeda, a portfolio manager at Hennessy Japan Fund told CNBC's "Squawk Box".