* Dollar index down 0.5 percent * Lack of strong stimulus by Bernanke may see dlr short unwinding * Euro recoups losses, vulnerable to selloff By Anirban Nag LONDON, Aug 26 (Reuters) - The dollar eased on Friday, as investors shuffled positions ahead of a much awaited speech from the Federal Reserve chief, with some expecting the greenback to stage a short term bounce if he does not signal a chance of further monetary stimulus. The euro edged higher against the dollar while higher-yielding currencies like the Australian and New Zealand dollars also advanced. Markets have see-sawed back and forth this week, reflecting a divide over expectations of how strong a signal Fed chairman Ben Bernanke may provide on the chances of more monetary easing in the coming months. The euro was up 0.5 percent at $1.4447, sidestepping rising Greek credit default swaps, with stop-loss cited above $1.4520, while on the downside bids from Asian sovereign investors would limit losses at around $1.4400. The dollar index was down 0.5 percent at 73.91 with the dollar eased against the Japanese yen . Earlier this week, there was intense speculation that Bernanke may announce a third round of asset purchases or some other extraordinary policy later on Friday in a speech in Jackson Hole, Wyoming, pressuring the dollar. But this view has been scaled back, giving the greenback a boost on Thursday. "If Bernanke signals he is likely to be less accommodative about providing liquidity, we could see the dollar recover and depending on how Wall Street reacts to that, we could see some flows into the greenback," said Roberto Mialich, FX strategist at Unicredit. "On the other hand, if he signals that he is ready to act and provide more support, then the dollar will weaken. If he says he is ready to act but not right now, I don't think the markets will be too disappointed." He added even if the markets were disappointed, the euro was unlikely to fall below $1.43, while on the topside it could gain to as high as $1.4550. More quantitative easing would flood the financial system with more dollars and is seen boosting stocks, higher yielding currencies and the euro while the greenback is likely to be sold off. On the other hand, if Bernanke refrains from setting the stage for more easing to support the flagging U.S. economy, the dollar is likely to benefit, at least in the short term. Part of the reason why investors have pared back their expectations of something dramatic from Bernanke is the realisation that despite sharp falls in stock markets, U.S. inflation is higher. While growth remains weak, Fed officials do not appear particularly concerned about recession risks. YEN RECOVERS The dollar traded 0.65 percent lower at 76.95 yen , coming off a two-week high 77.70 yen struck on Thursday. It hit a record low of 75.941 yen a week ago, giving rise to jitters that Tokyo would intervene in currency markets for the second time in less than a month. Individual Japanese players were spotted liquidating some yen-long positions ahead of the Jackson Hole speech, due to start at 1400 GMT. "The market is still yen long and as the yen failed to get stronger (versus the dollar) we may see further unwinding of those positions ahead of Bernanke, boosted by lingering fears of intervention," said Koji Fukaya, director of global foreign exchange research at Credit Suisse Securities in Tokyo. While Bernanke is expected to stop short of offering a grand economic fix, he may well signal a willingness to adjust the central bank's $2.8 trillion portfolio. Meanwhile, looking past Bernanke's speech, traders said the euro may come under pressure from continuing worries about the euro zone's debt crisis. The cost of insuring Greek debt against default neared record highs as a row over a deal with Finland to back its bailout contributions for Greece with collateral showed no sign of easing. . The euro recouped mild losses sustained on Thursday, trading firmer on the day against the dollar, but it was down 0.3 percent against the yen at 111.19 yen. Euro/dollar risk reversals remain elevated and skewed in favour of euro weakness with the one-month risk reversals trading around 3.25 for euro puts, up from 3.2 at the start of the week. "While Fed policy is an immediate focus with Jackson Hole, the troubling developments in various financial sector and Euro-area stress measures cannot go unnoticed," Deutsche Bank said in a note. The Australian dollar rose 0.7 percent to $1.0506 after Australia's central bank chief said the country was well positioned to tackle any further weakening of international conditions and sent a signal to investors that it was not contemplating deep rate cuts that some were pricing in. The New Zealand dollar was up 0.75 percent at $0.8339. (Additional reporting by Antoni Slodkowski; editing by Patrick Graham, Toby Chopra)

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