FOREX-Dollar drops ahead of Fed minutes, Bernanke speech
* Dollar index falls from three-year high
* Focus on Fed June meeting minutes and Bernanke speech later Wednesday
* Weak Chinese trade data buoys yen
* Aussie erases losses after slipping on China trade data
NEW YORK, July 10 (Reuters) - The dollar on Wednesday fell from the previous session's three-year high against a basket of currencies and made pronounced losses against the yen, as the market awaited minutes from the Federal Reserve's June meeting and a speech by Chairman Ben Bernanke.
While weaker-than-expected trade data from China favored the safe-haven yen and Swiss franc, sentiment towards the greenback remained upbeat, with investors likely to resume buying the dollar if the Fed minutes and Bernanke reiterate that the central bank is preparing to slow its asset-purchase program in coming months.
U.S. 10-year Treasury yields, with which the dollar index has a robust correlation, have slipped from a recent near-two-year high of 2.755 percent, spurring some profit-taking in the greenback.
"There is a risk that Bernanke in his speech could pour cold water on rising U.S. yields," said Jeremy Stretch, head of currency strategy at CIBC World Markets. "But any dollar weakness will be bought into as the U.S. economy has the impetus to continue recovering."
In early New York trade, the dollar fell 0.9 percent to 100.24 yen, pulling away from a six-week high of 101.53 yen reached on Monday on the Reuters trading platform.
China warned of a "grim" outlook for trade after a surprise fall in June exports, raising fresh concerns about the extent of the slowdown in the world's second largest economy.
The dollar index, which tracks the greenback against a basket of six currencies, was 0.3 percent lower at 84.358, off a three-year high of 84.753 struck on Tuesday.
At 2:00 p.m. EDT (1800 GMT), the minutes from the June 18-19 meeting of the Federal Open Market Committee will be released and perused by investors for any signs of the central bank's plan to trim its bond buying program.
Bernanke will speak at a National Bureau of Economic Research conference on the Fed's past and future at 4:00 p.m. EDT (2000 GMT). A question and answer session will follow his speech.
The June FOMC minutes will likely sound more hawkish than the subsequent public comments from Fed officials, at least with regard to its bond buying program, called quantitative easing, according to Credit Suisse.
"However, regarding the longer-term outlook for policy, the minutes may impart a more dovish tone," the firm said. "Although the rates market has almost entirely priced in a taper at this point, the minutes will still garner attention on the subject as the market seeks to glean any clues as to whether July is a possibility."
The dollar's drop gave the euro and sterling a breather. Both tumbled the previous day, hurt by growing expectations that central banks in the euro zone and Britain will have to keep policy loose for a long time.
The euro, shrugging off a downgrade to Italy's credit rating by Standard and Poor's on Tuesday, rose 0.3 percent to $1.2818 . The euro hit a three-month low of $1.2754 on Tuesday after European Central Bank policymaker Joerg Asmussen said the central bank's guidance on interest rates staying at a record low extended beyond 12 months.
The ECB later issued a statement saying Asmussen had not intended to give any guidance on the exact length of time for which it expects to keep rates at record lows.
"Notwithstanding these rather noisy intraday fluctuations in euro/dollar, we need to stress that tensions are showing up in a number of euro area indicators and maintaining modest downward pressure on the euro/crosses," said Stephen Gallo, European head of FX strategy at BMO Financial Group.
The euro was last down 0.5 percent against the yen at 128.58 yen.
The Australian dollar bounced after falling earlier in the session on the weak Chinese trade data, which reinforced expectations of a slowdown in China, a major export market for Australia.
It last traded 0.1 percent higher at $0.9182, off an intraday low of $0.9125 hit after the Chinese trade data.