Investors are wary of Ms Yellen hinting at a near-term interest rate hike, which could divert some of the liquidity that has underpinned riskier assets worldwide, though others predicted she would strike a more equivocal note. The dollar index, which tracks the currency against six major peers, slipped 0.11% to 94.675, while euro zone government bond yields crept up. Recent hawkish comments from other Fed officials have raised expectations of a US rate hike this year, though markets are not fully pricing one in till 2017. "Markets are a bit worried about the upcoming comments from Yellen, which is understandable given how much of the market strength is due to central bank action," said Philippe Gijsels, head of research at BNP Paribas Fortis in Brussels. "The fact that some of her disciples have indicated that it may be time to raise rates again has not done much in terms of calming sentiment. She will probably try to strike a balance between an improving US economy and risks abroad." Chris Scicluna, head of economic research at Daiwa Capital Markets, took a similar line, saying: "Yellen won't be able to ignore the current debate but she can't make a commitment either because there's a range of views on the FOMC." On Thursday San Francisco Fed President John Williams and Kansas City Fed President Esther George defended the need to raise rates, albeit gradually, to keep the US economy from overheating. Emerging equities are set for their first weekly loss in seven. The benchmark emerging market stocks index edged up 0.1% in wafer-thin trading, but was on course to end the week down 1.2% and in the red for the first time since the start of July. Earlier in Asia, Japan's Nikkei index fell 1.2% after US stocks closed modestly lower yesterday. Wariness ahead of Ms Yellen's speech also gave spot gold a leg-up. It rose 0.3%, narrowing this week's losses.

Source