* Bernanke says Fed prepared to act, but gives few details * Dollar rallies versus yen By Gertrude Chavez-Dreyfuss NEW YORK, July 17 (Reuters) - The dollar rallied on Tuesday after Federal Reserve Chairman Ben Bernanke said the central bank is prepared to boost a slowing U.S. economy, but offered few details. Investors had expected Bernanke to drop more hints about further monetary stimulus and when he did not specify measures to lift the economy, they covered their shorts on the dollar. Comments about another round of quantitative easing would have weighed on the greenback, as this would mean flooding the financial system with dollars, which would diminish the currency's value. "There's nothing new (in Bernanke's testimony), and the fact that he avoided any mention of specific steps clearly indicates there is going to be no increase in asset purchases or new stimulus in August," said Kathy Lien, managing director at BK Asset Management in New York. "They are really just biding their time until the September meeting. This is far less dovish than the market had anticipated, which is why we're seeing such a significant dollar rally." Bernanke said the Fed stands ready to offer additional support to the U.S. economy, but did not give specific measures. He added that the U.S. recovery is being held back by Europe's debt crisis and uncertainty surrounding U.S. fiscal policy. The euro hit session lows against the dollar at $1.2187 in the aftermath of Bernanke's comments. It was last $1.2218, down 0.5 percent on the day. Stops at $1.2240 were taken out as did bids at $1.2210-$1.2200, traders said. The euro also hit a fresh 3-1/2-year low vs sterling at 78.27 pence,, dropping to a record trough against the Australian dollar at A$1.18988. The dollar also reversed losses against the Swiss franc to trade 0.5 percent higher at 0.9836 franc, gaining 0.3 percent versus sterling, and 0.4 percent versus the New Zealand dollar. Still quantitative easing is not exactly off the table, said Joe Manimbo, senior market analyst, at Western Union Business Solutions in Washington, and as a result "the dollar may have limited upside scope and should buy the dollar some time to test fresh highs." The Fed last month expanded efforts to keep long-term interest rates low by announcing it would buy an additional $267 billion in long-term bonds while selling short-term securities. However, it held off from launching a third round of outright bond purchases that would expand its balance sheet, a form of stimulus known as quantitative easing (QE). Bets on more QE grew after disappointing U.S. retail sales data on Monday. The greenback also firmed 0.1 percent against the yen to 78.99 yen, a day after dropping to one-month lows. Expectations that the Bank of Japan could intervene and check gains by the yen was keeping investors wary of that pair, traders said. Japanese Finance Minister Jun Azumi hit out at speculators betting on gains in the yen due to weak U.S. economic data, and hinted the government was prepared to intervene to stem excessive moves.

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