By Brent Kininmont

TOKYO, Nov 8 (Reuters) The dollar stalled on Wednesday near a six-week low against the euro as traders waited for the outcome of a tightly fought battle for the U.S. Senate after the Democrats gained power in the House of Representatives.

President George W. Bush's Republicans ceded control of the House to the Democrats for the first time in over a decade, according to TV projections in the U.S. midterm elections.

The outcome in the Senate was still too early to call, however, with the Democrats gaining key seats in some states and Republicans leading tight races in others.

''The big story will be the Senate,'' said Ron Simpson, director of currency research at Action Economics in Tampa, Florida. ''If the Republicans hold on ... I think that will be perhaps the best outcome for the dollar to rally.'' Analysts said the Democrats' victory in the House would likely put the brakes on Bush's legislative agenda in his final two years in office.

Others in the market have said the vote's initial impact on the dollar could be limited as the results are unlikely to lead to a major shift in policy in the near term.

By 0620 GMT, the euro was little changed at $1.2775 after it climbed to $1.2820 on Tuesday, its highest level since late September.

With investors hesitating to push the dollar one way or the other, the euro was pinned in a tight 13-pip range, capped by the day's high of $1.2785.

The dollar was at 117.60 yen dipping from 117.70 yen in late New York trade.

The euro slipped to 150.25 yen but within reach of a record high of 150.80 yen touched last month.

The Australian dollar fell to $0.7705 erasing gains made after the Reserve Bank of Australia earlier raised rates as expected to 6.25 percent, though the central bank left open the question of whether it would hike again.

Sterling was in sight of an 18-month high against the dollar and an eight-year peak versus the yen as investors waited to see if the Bank of England would raise rates to 5.0 percent on Thursday, as widely expected.

MIZUNO AND LACKER The dollar fell to the day's low around 117.50 yen after Bank of Japan Policy Board member Atsushi Mizuno suggested in a speech that Japanese interest rates will rise, albeit gradually, so long as the economy grows in line with BOJ expectations.

His remarks were seen as more restrained than those of BOJ Governor Toshihiko Fukui, who reiterated on Tuesday that rate rises would be gradual but said the central bank would not wait for risks to the economy to appear before tightening policy.

''There was no specific hawkish comment from Mizuno,'' said Hidenori Kato, head of forex sales and trading at Societe Generale in Tokyo.

He said the market was eager to jump on any news that might move currencies out of tight ranges.

Markets generally expect the BOJ to raise rates from 0.25 percent in January-March, with any indication they could rise faster boosting the low-yielding yen.

Investors shrugged off comments by Richmond Fed President Jeffrey Lacker that the U.S. central bank had failed to emphasise its desire for lower inflation.

In a Financial Times interview published on Wednesday, Lacker said inflation risks have persisted because ''we have not communicated very strongly that we want inflation to be lower and would be willing to take action to bring that about''.

Lacker has three times opposed the Federal Reserve's decision to hold rates steady at 5.25 percent.

REUTERS SBA DS1303