TOKYO, Sept 20 (Reuters) The dollar moved sideways but held above a 15-year low against a basket of currencies on Thursday as investors awaited testimony from Federal Reserve Chairman Ben Bernanke later in the day for more clues on monetary policy.
The Fed slashed the federal funds rate to 4.75 percent from 5.25 percent this week to shield the U.S. economy from a deepening housing slump and credit market turbulence.
The dollar rose broadly in the previous session as investors bet that the Fed's larger-than-expected cut would shore up the U.S.
''The currency market is likely to look at the reaction in the U.S. stock market for direction after Bernanke's comments,'' said Masashi Kurabe, a senior manager of forex trading at Bank of Tokyo-Mitsubishi UFJ.
The dollar index edged lower from late U.S. trade to 79.237, after rebounding from 79.091 the previous session, its lowest since 1992.
The U.S. currency was little changed against the yen at 115.90 yen The euro was steady at $1.3970, staying within reach of its record high of $1.3989 hit earlier this week.
Bernanke is scheduled to testify on problems in the subprime mortgage sector before a congressional committee from 1400 GMT.
While the dollar was supported as investors took the view that the easier monetary policy improved U.S. economic prospects, traders and analysts said the greenback is expected to weaken in the long-term, once investors look again at rate differentials.
''Given that the Fed is likely to cut interest rates further, I think the trading range in dollar/yen will fall to 105-115 yen in the next few months from the current 115-120 yen,'' said a senior trader at a Japanese bank.
Most market players expect another Fed rate cut in October to 4.5 percent, but such a level is seen as marking the end of the central bank's monetary easing cycle.
High-yielding currencies rose as Asian stocks consolidated their gains after a two-day rise in U.S. stocks following the Fed's move, supporting a risk appetite among some investors who returned to carry trades, in which a low-yielding currency is borrowed to fund investments in higher-yielding assets.
The Australian dollar rose 0.3 percent to 85.90 U.S. cents after striking a six-week high of 85.98, while advancing 0.2 percent against the yen to one-month highs near 99.60 yen.
The New Zealand dollar eased 0.3 percent to 73.30 U.S. cents after touching a one-month high of 73.77 earlier in the session. The kiwi fell 0.5 percent against the yen to 84.90 yen.
The Nikkei share average was flat after marking its biggest one-day percentage gain in more than five years in the previous session.
Sterling stayed under pressure after hitting a 17-month low against the euro in the previous session as traders interpreted the minutes of this month's Bank of England meeting as signalling possible interest rate cuts in the future.
The pound was steady against the dollar at $1.9997 The euro was little changed at 69.80 pence after hitting a 17-month peak of 69.97 pence in the previous session in the wake of the BoE minutes.
Bank of Japan Governor Toshihiko Fukui will speak at the annual meeting of the Japan Securities Dealers Association from 0705 GMT.
The BOJ kept interest rates unchanged on Wednesday.
But Fukui's comments are not expected to have a major effect on the market after he said on Wednesday the central bank would assess the impact of problems in the United States before considering a rate rise.
REUTERS SI SSC1132