* Euro trims gains as stocks pull back from early rise * Investors brace for Fed's Bernanke speech on Friday * High-risk FX selloff seen if Fed doesn't signal more QE By Naomi Tajitsu LONDON, Aug 25 (Reuters) - The euro trimmed gains against the dollar on Thursday, tracking a pullback in European shares, and the single currency risks more downside if Federal Reserve President Ben Bernanke fails to signal more economic stimulus during a speech the following day. Selling by a U.S. investment bank knocked the euro from a session high touched in early European trade, when the single currency was helped by sovereign and eastern European demand. Speculation of a third round of quantitative easing has dented the dollar in past weeks. Investors are worried the U.S. economy may slip into recession but some are not convinced Bernanke is ready to signal another round of bond-buying to stimulate the economy. Traders and analysts said the market had gotten ahead of itself in positioning for the possibility of more QE, adding that a rise in bets to sell the dollar in past weeks suggested those positions may be bought back as an initial reaction to Bernanke's speech. "There is a risk of a 'buy the rumour sell the fact' situation after the event and there is a possibility that risk will sell off again," said Ankita Dudani, RBS currency strategist. Other analysts said riskier currencies, including the euro, the Australian and New Zealand dollars which have benefited from recent dollar weakness, may gain slightly more if Bernanke pledges readiness to act to help the economy when necessary. "The market at the very least wants to hear the Fed is ready and willing to act if global growth and the U.S. economic cycle deteriorates further," said Henrik Gullberg, currency strategist at Deutsche. He added that Bernanke would have to sound "very dismissive" about any policy stimulus for the market to significantly price out the possibility of further QE sometime in the future. Analysts agreed that after Bernanke's speech the market's focus will likely move back to Europe's sovereign debt woes and the fragility of the euro zone economy and banking sector, along with the weakening global growth outlook, which may limit demand for riskier assets. The euro traded 0.1 percent higher on the day at $1.4425, pulling back from a session high around $1.4475. The single currency tracked moves in European shares which backed off the day's high, while still managing to trade 0.3 percent higher. Market participants have also cited offers from Asian sovereign names around $1.4500, which have kept the euro below that level for the past week. The dollar was unchanged versus a currency basket, while it inched up 0.2 percent to 77.10 yen . The dollar remains supported versus the yen on talk that Japan may enter the FX market to stem ongoing strength in its currency, which rallied to a record high of 75.94 to the dollar last week. The Australian dollar was slightly lower on the day while the New Zealand currency edged up 0.2 percent, supported by a better-than-expected reading of New Zealand retail sales. Both currencies were holding gains made earlier in the week, and some in the market said a profit-taking slide in gold prices suggested an slight boost in demand for higher-risk currencies. But analysts cautioned that those moves, along with higher equities and the previous day's sell-off in U.S. bonds, were likely rooted in position unwinding rather than any big shift in risk appetite or investors' views of economic fundamentals. Gullberg at Deutsche pointed out that dismal manufacturing and sentiment readings from Germany this week suggest euro zone's largest economy may be faltering as the region struggles to solve its debt crisis, which will limit demand for the euro. Many analysts say the market is mindful of the risk that the global economic outlook will deteriorate, which will keep demand intact for the "safe-haven" yen and the Swiss franc, despite efforts by Japan and Switzerland to stem strength in their respective currencies.

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