"Yellen highlighted inflation uncertainty at a time when the doves of the board have increasingly started questioning about possibly stalling the tightening process until inflation is closer to target," said Paresh Upadhyaya, portfolio manager at Amundi Pioneer in Boston.
Yellen also noted that given current estimates, the federal funds rate "would not have to rise all that much further" to reach a neutral level that neither encourages nor discourages economic activity.
The Fed still feels the economy needs loose - or accommodative - monetary policy, so a lower neutral rate may mean fewer rate hikes.
"The comment was very dovish. She implied the Fed may be close to the end of tightening, which was the first time we actually heard it from her," said Upadhyaya.
The dollar index, which tracks the greenback against six major rivals, was up 0.10 percent to 95.77, after falling to 95.511, its lowest since June 30.
Against the yen, the greenback was 0.07 percent higher at 113.21 yen following a decline in short-term U.S. interest rates after Yellen's testimony.