Fed's Yellen to speak - stocks up, dollar sluggish

The dollar was stuck near its lowest in more than a year against the euro on Wednesday while stocks edged higher in light trading ahead of Janet Yellen's testimony to Congress. 

While the Federal Reserve chair is expected to say that the Fed remains on a hawkish course of steadily rising rates, any signals on how the bank is viewing a retreat in inflation and muted wage growth will be closely watched. 

Comments overnight from two of her colleagues calling for caution on further interest rate rises have pushed back the probability of a hike again before the end of the year to 50 percent, according to the CME's Fed watch data.

Sterling hit a two-week low against the dollar and deepened a fall to its lowest in 8 months against the euro on Wednesday after Bank of England Deputy Governor Ben Broadbent said he was not yet ready to raise interest rates. 

The fall in sterling once again lifted the exporter heavy UK bluechip index .FTSE which rose 0.7 percent, outperforming regional peers. 

U.S. stocks took a brief tumble during Tuesday trading on Wall Street after emails disclosed President Donald Trump's eldest son welcomed help from a Russian lawyer for his father's 2016 election campaign against Hillary Clinton.

The dollar, however, failed to recover after the damage suffered from the new twist in the Trump campaign's alleged links with Russia. But by the closing bell, Wall Street shares had clawed back their losses.

The greenback was trading flat against a basket of major currencies .DXY and was hovering near its lowest since last May against the euro EUR=. 

In commodity markets, oil prices got a reprieve from worries about oversupply after the U.S. government cut its crude production outlook for next year and as fuel inventories plunged.

Brent crude futures LCOc1 rose 1.3 percent while U.S. West Texas Intermediate (WTI) crude futures CLc1 were up 2 percent.