In U.S. trading on Thursday, EUR/USD was down 0.25% at 1.3452.
The euro, still reeling from an ECB rate cut amid fears inflation rates are waning, narrowed its losses against the greenback after Yellen told the Senate Banking Committee that the U.S. central bank's USD85 billion in monthly bond purchases have and will continue to support the economy until more sustained recovery becomes evident.
"We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession," Yellen said.
"Unemployment is down from a peak of 10 percent, but at 7.3 percent in October, it is still too high, reflecting a labor market and economy performing far short of their potential. At the same time, inflation has been running below the Federal Reserve's goal of 2 percent and is expected to continue to do so for some time."
Monetary stimulus tools such as monthly bond purchases aim to spur recovery by driving down long-term interest rates, weakening the dollar in the process.
"The Federal Reserve is using its monetary policy tools to promote a more robust recovery. A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases," Yellen said in her speech.
"I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy."
Meanwhile, the euro edged lower after official data revealed that the euro zone economy expanded by 0.1% in the three months to September, slowing from the 0.3% growth achieved in the second quarter when the euro zone exited a recession.
Economist had forecast quarter-on-quarter growth of 0.2%.
Elsewhere in the U.S., the Labor Department reported earlier that the number of individuals filing for initial jobless benefits last week declined by 2,000 to a seasonally adjusted 339,000.
Analysts had expected U.S. jobless claims to fall by 11,000, which also softened the dollar.
A separate report showed that the U.S. trade deficit widened to USD41.8 billion in September from a deficit of USD38.7 billion in August.
Analysts were expecting a USD39.0 billion deficit.
The greenback was down slightly against the pound, with GBP/USD up 0.02% at 1.6058.
The dollar was up against the yen, with USD/JPY up 0.81% at 100.05, and up against the Swiss franc, with USD/CHF up 0.33% at 0.9164.
The yen slumped against most major currencies after Japanese Finance Minister Taro Aso said Japan should maintain currency market interventions as policy tools to use when excess volatility roils markets.
The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.23% at 1.0481, AUD/USD down 0.44% at 0.9317 and NZD/USD trading down 0.13% at 0.8278.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.10% at 81.08.
On Friday, the U.S. is to round up the week with data on manufacturing activity in the New York region, as well as reports on industrial production and import prices.
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