"We now judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect", she said in an address in Chicago.
An increase in Fed interest rate "adds further strength to the U.S. dollar and when that happens you're going to see a reversal of fund flow from emerging markets", said Nicholas Teo, a trading strategist at KGI Securities (Singapore) Pte Ltd.
The US dollar index rose to its highest level since early January as a third Fed official this week, Fed governor Lael Brainard, said tighter monetary policy "will likely be appropriate soon".
This Friday's United States employment report will be closely watched by the Fed for confirmation that the job market is near full employment.
"The Fed will hike unless next week's payroll report is calamitous", said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
U.S. Real gross domestic product (GDP) increased at an annual rate of 1.9 percent in the fourth quarter of 2016, missing market consensus of 2.1 percent, according to the second estimate released by the Commerce Department. It could offer the Fed a final reassurance before the central bank raises the cost of borrowing on consumers and businesses. The personal consumption expenditures price index, the Fed's favored measure of inflation, rose 1.9 percent in the 12 months ending in January, almost reaching the Fed's 2 percent inflation target.
The US Federal Reserve is set to raise interest rates this month and is on track to lift them further later this year, its chair Janet Yellen has signalled.
"With Brainard flying the dove's coup, she has tipped the scales in overwhelming favour of a rate hike as the market now views March as fait accompli".
Baltimore police officers indicted in racketeering case
Sometimes, the officers turned off their body cameras to avoid recording what they were up to, according to the indictment. But Hersl, Jenkins and Rayam took a sock containing $4,800 and removed $2,000 from it, prosecutors said.
Asian markets closed lower: Tokyo's Nikkei fell 0.5 per cent, Hong Kong's Hang Seng lost 0.7 per cent, and China's Shanghai Composite shed 0.4 per cent.
The Standard & Poor's 500 index fell 3 points, or 0.2 per cent, to 2,378.
But economists said the Fed's more hawkish stance was unlikely to alter the RBA's own rates course anytime soon, despite mounting evidence that last year's rate cuts have sparked a re-acceleration of house prices and investment lending, particularly in Sydney and Melbourne. Speculation has been running high that the Federal Reserve is likely to hike interest rates at its upcoming meeting and today's speech from Janet Yellen strongly hinted that that is a likely scenario.
Since mid-2016, however, the US economy has shown more resilience, and risks from overseas have diminished, Yellen said.
Asked after her speech about how expected tax and spending policies might figure into the Fed's outlook, Yellen said officials would wait until they know more about the composition and timing of any changes.
The buck rose to a month and a half high of $1.2213 against the pound sterling Friday morning, but has since retreated to around $1.2265.
She said that the process of removing accommodation likely will not be as slow as it was during the past couple of years, if the economy is not adversely affected by unanticipated developments.