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TOKYO, July 17 (Reuters) The dollar hung near a record low against the euro on Tuesday and hovered near its weakest level in more than 20 years versus sterling and the New Zealand dollar as concerns about problems in the U.S. subprime market kept the U.S.

currency under selling pressure.

The yen also stayed weak as investors used the low-yielding currency to buy assets in currencies with higher yields on the view that the Bank of Japan will raise rates very slowly even as the market expects a lift to 0.75 percent next month.

''We're seeing ongoing weakness in the dollar due to concerns about the subprime market,'' said Hideaki Inoue, forex manager at Mitsubishi UFJ Trust and Banking, as Tokyo traders returned from a market holiday on Monday.

''The market wants to see exactly what impact the recent problems in the subprime market will have on the rest of the economy.'' The dollar licked its wounds after U.S. ratings downgrades to billions of dollars in risky mortgage debt last week had triggered a round of selling in the U.S. currency.

Traders said that any signs of concerns from Federal Reserve Chairman Ben Bernanke about problems in the subprime market when he delivers his semi-annual testimony on monetary policy on Wednesday and Thursday may prompt more selling in the dollar.

The euro was little changed at $1.3775 early in the Tokyo session, hanging near a record high of $1.3815 hit on Friday according to electronic trading platform EBS.

The single currency was at 167.95 yen after climbing to an all-time high of 168.95 yen late last week.

The dollar was flat at 121.90 yen having recovered from a one-month low of 120.99 yen hit last week.

Traders continued to sell the dollar against higher-yielding currencies, keeping sterling near a 26-year high of $2.0405 hit in the previous session.

The Australian dollar hovered around an 18-year high of $0.8761 touched on Monday, while the New Zealand currency was on the verge of climbing above $0.7941 its strongest in 22 years hit in the previous session.

In addition to Bernanke's testimony to the U.S. Congress and the Senate, the market is also awaiting data on June consumer prices on Wednesday.

Also due that day are June figures on housing starts and building permits, which will be in focus particularly given continuing worries about the housing industry.

Soft readings could bolster the view that the Fed will keep U.S. rates at 5.25 percent through year-end, while central banks in countries like Britain and the euro zone are seen lifting rates at least once more this year.

Tokyo traders said that the market had been initially rattled by a strong earthquake that shook northwestern Japan on Monday.

The quake, which killed at least nine people, injured more than 900 hundred and flattened hundreds of homes, prompted some yen selling in overseas trade on Monday, the impact was short-lived as the impact on the nation's economy is expected to be limited.

Reuters JK VP0655