The Dow Jones industrial average slipped 0.05 percent, or 11.77 points, to close at 22,284.32, but the S&P 500 and tech-heavy Nasdaq finished slightly higher. Apple gained 1.7%, halting a four-session skid.
Yellen, in her most detailed speech on inflation risks this year, described three areas of uncertainty in the inflation outlook. The influence of labor utilization on inflation has become quite modest over the past 20 years, implying that the inflationary consequences of misjudging the sustainable rate of unemployment are low.
Ms. Yellen allowed that the Fed's understanding of inflation is "imperfect" and suggested the central bank could change its posture if inflation doesn't pick up as officials anticipate. Yellen also said the Fed should take care not to raise rates too slowly.
"Looking beyond the storm effects - which will make interpreting near-term economic data releases more hard -the USA economy remains on a trajectory of slightly above-trend growth", Dudley said. Case-Shiller's national index rose 5.9%, up from 5.8%.
On the economic front, US sales of new single-family houses in August were at a seasonally adjusted annual rate of 560,000, missing market consensus, said the Commerce Department Tuesday.
U.S. consumer confidence fell in September and home sales dropped to an eight-month low in August due to the impact of Hurricanes Harvey and Irma, supporting the view that the storms would hurt economic growth in the third quarter.
Bearish positions against the dollar against a broad basket of currencies are at their biggest since January 2013 and one trader at an Asian bank reported some short covering in positions.
Among other things, ongoing tensions between the U.S. and North Korea are not "filling people with confidence", he said.
The Nikkei average declined 63.14 points or 0.31 percent to 20,267.05, the lowest level since September 15, while the broader Topix index closed 0.50 percent lower at 1,664.43.
In the other precious metals, the spot silver price rose $0.048 to $16.835-16.88 per oz.
It was a mixed finish in Asia today, as traders weighed increasing geopolitical tensions between the USA and North Korea.
The tax reform speech by USA president Donald Trump in Indianapolis later on Wednesday - of which he had promised "the largest tax cut in the history of our country" - will be closely watched by investors given its possible repercussions for the dollar.
OIL: Benchmark U.S. crude rose 4 cents to $51.92 per barrel on the New York Mercantile Exchange. Prices on Monday surged 3.1%, with the $52.22 settlement the highest since mid-April. The contract slid 34 cents to finish at $51.88 a barrel on Tuesday. USA crude stocks were reduced by 761,000 barrels last week, the American Petroleum Institute announced on Tuesday. Richard Shelby, R-Ala., said Tuesday morning in an interview on Bloomberg Television that he doesn't think Trump will nominate Yellen for a second term at the helm of the central bank. An increase for crude supplies would follow three-consecutive weekly increases reported by the EIA, as Hurricane Harvey disrupted US refinery operations, reducing demand for crude oil. The Treasury Department on Tuesday afternoon sold $26 billion of two-year notes.
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