(Reuters) - The dollar traded near a three-week low against a basket of currencies on Wednesday, with investors wary of betting on its strength 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 .DXY which tracks the greenback's performance against a basket of major currencies, was up 0.1 percent at 82.681 but remained close to a three-week trough of 82.395 hit on Tuesday when it slid more than 0.6 percent. "I think Bernanke's speech will have something for everybody but there will be a moderately dovish flavor to it as 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. He added that while this might initially result in the dollar falling, longer term he remained bullish on the currency due to an improving economic backdrop in the United States. Bernanke's testimony before the House Financial Services Committee will start at 1400 GMT (10 a.m.ET), with the text of his prepared remarks to be released at 1230 GMT. The Fed chief is expected to deliver a message reassuring markets of the U.S. central bank's continued support for the recovering economy but reiterating that its ultra-easy policy cannot last indefinitely. Against the dollar, the euro was down 0.1 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 0.7 percent against the yen at 99.72 yen, although it was still some way off this month's high of 101.53. The president of the Kansas City Federal Reserve Bank, Ester George, again argued that the central bank should start cutting its massive asset-buying program in September. Traders said the pre-emptive move to cut long dollar positions meant there could actually be room for a bounce if Bernanke does not sound too soothing. "We continue to favor running long dollar positions versus G10 currencies, whose central banks are in easing mode, particularly sterling," analysts at BNP Paribas wrote in a note. Before Bernanke's speech, the Bank of England will release the minutes of its latest MPC meeting at 0830 GMT, which could shed more light on whether new governor Mark Carney voted to increase the bank's asset purchases. Sterling was down 0.5 percent at $1.5088. The euro was up 0.3 percent against the pound at 87.03 pence, not far from the four-month high of 87.075 set on Tuesday.

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