By Lisa Twaronite and Hideyuki Sano
TOKYO (Reuters) - Asian shares edged up on Friday, while the dollar rose 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.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.2 percent in early trade, but on track for a weekly loss of more than 4 percent.
Japan's Nikkei stock index rose 1.1 percent, poised to lose 1.7 percent in a holiday-shortened two-day trading week.
Data released before the open showed Japan's core consumer prices marked the first annual drop since the central bank deployed its massive stimulus program more than two years ago.
Japan's government also cut its economic assessment and highlighted external risks posed by China and a U.S. interest rate hike.
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.
"We doubt Fed officials will have enough new information to start tightening at the October meeting if they were not prepared to act last week, but we expect they will be moving in December," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics.
"Implicitly, the drag from global forces is being offset by domestic strength," he said in a note to clients.
Yellen struggled to finish a speech at the University of Massachusetts at Amherst due to dehydration, for which she received medical attention.
The Fed chair later attended a dinner event as planned, a university spokesman said.
The euro fell about 0.5 percent to $1.1180 from around $1.1230, while the dollar was up around 0.2 percent to 120.30 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.
U.S. stock futures held relatively firm, up 0.4 percent in early Asian trade, after stocks around the world fell for a fifth day on Thursday, sliding towards two-year lows. 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.