Dollar gains after Yellen revives rate hike expectations

By Hideyuki Sano

TOKYO (Reuters) - The dollar jumped and U.S. interest rate futures price briefly dropped after Federal Reserve Chair Janet Yellen suggested the central bank is still on track to raise interest rates later this year.

The euro fell about 0.5 percent to $1.1174 from around $1.1230 while the dollar rose to around 120.27 yen from around 120.00 yen before Yellen's speech.

Federal fund futures contracts for January fell to as low as 99.735 in price, pricing in more than 50 percent chance of a rate hike by the end of this year, before erasing losses.

Yellen, speaking a week after the Fed delayed a long-anticipated rate hike, said she and other Fed policymakers do not expect recent global economic and financial market developments to significantly affect the central bank's policy.

The Fed chair struggled to finish a speech at the University of Massachusetts at Amherst due to dehydration and

received medical attention.

She later attended a dinner event as planned, a university spokesman said.

U.S. stock futures held relatively firm, up 0.4 percent in early Asian trade while Nikkei futures traded in Chicago pointed to a small rise in the Nikkei <.N225>.

Earlier on Thursday, stocks around the world fell for a fifth day, sliding towards two-year lows, as worries lingered over global economic growth and Volkswagen's emissions test scandal rattled European carmakers.

The Brazilian real bounced back sharply after hitting a record low of 4.2482 to the dollar , after the head of the Brazilian central bank vowed to use all instruments in its arsenal to curtail the real's collapse.

The real last stood at 3.9363 per dollar, rising 6.1 percent on the day.

(Reporting by Hideyuki Sano; Editing by Eric Meijer)