FOREX -Dollar gains before Yellen speech

By Karen Brettell

NEW YORK, May 27 (Reuters) - The dollar index rose on Friday, on track for its strongest monthly performance since last November, before U.S. Federal Reserve Chair Janet Yellen is due to speak and as investors anticipate rate increases in coming months.

Investors are focused on Yellen's speech for any new signals that the U.S. central bank is close to raising interest rates, after numerous Fed officials in recent weeks have talked up expectations that an increase may be near.

The dollar added to gains on Friday after data showed that U.S. economic growth was revised upward for the first quarter, even though the revision was lower than economists had expected.

"The headline was a little softer than expected, but not really anything that dents the outlook for what we've seen from Fed speakers, which seems to be a bit more hawkish since we've gotten the release of the April minutes las t week," said Martin Schwerdtfeger, a foreign exchange strategist at TD Securities in Toronto.

Minutes from the Fed's April meeting, released last week, showed that central bank officials felt the U.S. economy could be ready for another interest rate increase in June.

Yellen is due to speak at 1715 GMT at an event hosted by Harvard University.

The dollar index was up 0.30 percent at 95.454. It has surged from a low of 91.919 on May 3 but remains down slightly from Wednesday's two-month peak of 95.661.

As recently as early May, a Fed rate hike in June was completely off the agenda. But after a string of stronger data and the Fed officials' comments, the likelihood of an increase based on Fed funds futures has reached around 30 percent.

Investors will scrutinize next week's data releases, which will culminate in the June 3 employment report for May, for further signs of whether U.S. growth i s strong enough for the Fed to pull the trigger on a rate increase.

"Next week is a big one with U.S. non-farm payrolls and ISM (Institute for Supply Management) data," said Nomura currency strategist Yujiro Goto.

Holidays in Britain and the United States are likely to curtail volumes on Monday.

The euro eased to $1.1150, staying above Wednesday's two-month trough of $1.1129. The dollar was a tad weaker against the yen at 109.66, still down from last Friday's three-week high of 110.59 yen. (Additional reporting by Anirban Nag in London; Editing by Lisa Von Ahn)

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