FOREX-Dollar subdued as markets seek Fed policy clues from Bernanke
* Dollar near 3-week low ahead of Bernanke testimony
* Bernanke seen reiterating that tapering is not tightening
* Fed chief could have slightly dovish slant
* Sterling rises after unanimous vote to keep BoE QE on hold
LONDON, July 17 (Reuters) - The dollar struggled near a three-week low against a basket of currencies on Wednesday, with investors wary of betting on it ahead of Federal Reserve Chairman Ben Bernanke's testimony to Congress later in the day. Bernanke last week caused a dramatic dollar sell-off with comments that were considered unexpectedly dovish. That kept most market participants on the sidelines on Wednesday ahead of comments they hope will give more clarity on when and at what pace U.S. monetary stimulus will be scaled back. The dollar index which tracks the greenback's performance against a basket of major currencies, was flat at 82.595, not far from the three-week trough of 82.395 hit on Tuesday when it slid more than 0.6 percent. The dollar slipped against sterling which rallied to a two week high of $1.5247, after minutes from the Bank of England meeting surprised markets when it showed all nine MPC members had voted against expanding its bond-buying programme. This wrong-footed investors who had built large bets against sterling in recent weeks expecting further policy-easing signals. Bernanke's testimony before the House Financial Services Committee will start at 1400 GMT, with the text of his prepared remarks to be released at 1230 GMT. The Fed chief is expected to deliver a message about the U.S. central bank's continued support for the recovering economy but reiterating that its ultra-easy policy cannot last indefinitely. "Bernanke needs to reassure markets that interest rates are going to remain accommodative and manage rate expectations from moving up too quickly, so in a way he has to be quite dovish," said Ian Stannard, head of European FX strategy at Morgan Stanley. "At the same time, any hints with regards to tapering (stimulus), markets will take those as being a hawkish signal." Stannard said that Bernanke's speech could lead to some dollar volatility but he remained bullish on the currency in the longer term due to an improving economic outlook in the U.S. Against the dollar, the euro was down 0.2 percent at $1.3142, but still within sight of last week's peak of $1.3208. Initial support was cited at Monday's low of $1.2992. The dollar was up 0.6 percent against the yen at 99.64 yen, although it was still some way off this month's high of 101.53. Some analysts felt Bernanke would lean towards a more dovish tone to calm markets and ensure asset prices remained stable. "He would rather the market remains buoyant on a more dovish take than slump on a more hawkish one," said Neil Jones, head of hedge fund FX sales at Mizuho Corporate Bank.