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FOREX-Dollar lifts off 2-month low ahead of Powell confirmation

* Dollar/yen holds steady above Monday's 2-month low

* Focus on Fed confirmation for Powell, U.S. tax reform plan

* Pounds drifts lower after BoE says banks can handle bad Brexit

* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh (Updates prices)

LONDON, Nov 28 (Reuters) - The dollar was stuck near a two-month low on Tuesday, as traders waited for the confirmation hearing and first serious test for new Federal Reserve chair Jerome Powell.

The U.S. currency looked well corseted in early European trading, with it a shade higher against the Japanese yen, British pound and Canadian dollar but fractionally lower against the euro.

In prepared remarks for his Senate confirmation hearing released by the Fed on Monday, Powell, who is already a policymaker, defended the U.S. central bank's use of broad crisis-fighting powers.

He will take questions during the hearing. The brief statement had also signalled a willingness to move aggressively against a downturn, and an insistence on flexibility and independence from political influence in setting policy.

"The market sees Powell as mister continuity so nothing is expected, but I think there is some risk around the event," said Saxo Bank's chief FX strategist John Hardy.

"There are lots of hypothetical questions they could ask him... and if he appears on the hawkish side there could be some volatility."

The dollar was last at 111.30 yen, having set a two-month low of 110.85 yen on Monday after investors were spooked into the yen by Japanese media reports that North Korea may be preparing another missile launch.

Worries about delays in the implementation of U.S. tax cuts also continued to weigh on the greenback even as Donald Trump tweeted again that the plans were progressing. Heavy falls in Chinese stocks in recent days have also helped the yen.

"China clamping down on...a lot of the shadow banking is a good thing for the long-term, but obviously, there's going to be a bit of a meltdown in the short term," Innes said.

Back in Europe, Britain's pound dipped to $1.3310 as traders shrugged off a Bank of England stress test which said that UK banks could cope with a disorderly Brexit. The euro was barely budged too at $1.1903, after scaling a two-month peak of$1.1961 on Monday.

Asia's star meanwhile had been New Zealand's dollar which had climbed as much as 0.45 percent as what Saxo's Hardy called "the negative vibes" triggered by the country's recent elections, continued to ease.

(Reporting by Masayuki Kitano; Editing by Raissa Kasolowsky)