The dollar traded narrowly lower Wednesday as investors awaited Federal Reserve Chairman Ben Bernanke's congressional testimony on the U.S. economy and monetary policy. "It is widely expected that he will hold to the line that the current Fed bias (exceptionally low interest rates for an extended period of time) won't change anytime soon," wrote strategists at KBC Bank in Brussels. "So, this commitment shouldn't come as a surprise anymore." Bernanke is scheduled to deliver testimony before lawmakers in Washington. The dollar index (DXY), which measures the U.S. unit against a trade-weighted basket of six major currencies, fell to 80.734, down from 80.874 in late North American trading Tuesday. The euro edged slightly higher to change hands at $1.3547, up from $1.3534 on Tuesday. The dollar had gained against most major rivals other than the Japanese yen on Tuesday, as worries rose over the pace and sustainability of the global recovery. Currency traders keyed on a drop in German business confidence and lower consumer sentiment in the U.S. U.S. equity futures were mixed in range-bound trading Wednesday morning, while European stocks were mostly lower. The KBC strategists said the euro could find some downside protection if Bernanke's testimony provides some solace for world equities. But currency analysts at UniCredit MIB warned that the euro is likely to retain its downside bias amid ongoing fears over Greece's fiscal outlook. A one-day strike by major Greek unions was under way Wednesday. "Strikes in Greece, more debate in Germany on aid to Greece and Bernanke's testimony may add new pressures (on the euro) back toward the year's low at $1.3440," UniCredit warned. In other trading Wednesday, the dollar (CUR_USDYEN) changed hands at 90.07 yen, down from 90.21 yen. Big event The chairman of the Federal Reserve, by law, testifies twice a year to Congress -- "always a big event for the forex markets because the central bank governor will be asked tough questions about the economy and monetary policy," said Kathy Lien, director of currency research at GFT. "This is especially true at this critical juncture of monetary policy," she wrote in a note to clients. She pointed out that the last time Bernanke spoke was on Feb. 10, little more than a week before the central bank announced a surprise 25-basis-point hike in its discount rate, to 0.75%. "If Bernanke is more dovish than the market expects, the dollar could rally on risk aversion," she said. "However if he remains hawkish and warns of additional normalization in the near future, the dollar could also rally as the outlook for U.S. interest rates brightens."

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