Dollar slides from more than 4-week high vs FX basket

* Bernanke dashes hopes about U.S. rate hike
* Dollar falls more than 1 percent vs yen

(Recasts, updates prices, adds quotes, Bernanke comments, changes byline)

By Gertrude Chavez-Dreyfuss

NEW YORK, Dec 7 (Reuters) - The dollar fell from four-week highs on Monday as Federal Reserve Chairman Ben Bernanke doused expectations the U.S. central bank would raise interest rates anytime soon.

Bernanke said that while the U.S. economy has improved, the recovery remains fragile and the unemployment rate could remain high for some time. In remarks before the Economic Club of Washington, he added that he still sees an extended period of low rates. For his remarks, click on [ID:nN07169826].

Bernanke is emphasizing the weakness and the downside to the U.S. economy, said Brian Dolan, chief currency strategist, at Forex.com in Bedminster, New Jersey. Therefore, he's postponing interest rate hike expectations. He left a very clear impression that rates will remain on hold,

Upbeat U.S. jobs data last Friday had fueled speculation the Federal Reserve may consider winding down its stimulus measures and start shifting to a tightening bias soon.

After Bernanke's statements, traders readjusted their interest rate expectations and have squared up their long dollar trades built since Friday.

In early afternoon trading, the ICE Futures' dollar index .DXY fell 0.5 percent to 75.516 after earlier hitting a more than four-week high at 76.183.

The euro edged up 0.1 percent to $1.4869 after trading lower for most of the session. It rose as high as $1.4883 following Bernanke's remarks. In earlier trade, it fell to $1.4757, according to Reuters data, its weakest since Nov. 4.

Market participants said euro losses had been limited anyway, as traders suspected stop-loss orders around $1.4750. Some analysts said the slide in the single European currency was providing a good opportunity to buy on dips.

The euro showed little reaction to news of an unexpected fall in German manufacturing orders during October due to weaker export demand, with analysts saying this was partially offset by an upward revision to September's data. [ID:nGEE5B60X9].

Euro investors also showed little reaction to comments from European Central Bank President Jean-Claude Trichet, who said the euro area economy is showing increasing signs of recovery. [ID:nGEE5B6173]. [ID:nGEE5B61E5].

Elsewhere the dollar was now down against the Swiss franc at 1.0160, while sterling gained 0.1 percent to $1.6466.

Despite its broad gains, the dollar was down 1.3 percent at 89.26 yen and remained well above a 14-year trough of 84.82 yen, marked in late November on trading platform EBS. The euro was down 1.2 percent at 132.75 yen EURJPY=.

The yen's strength was mostly technical, analysts said, after the dollar gained 2.5 percent against the yen on Friday.

Many in the market say the dollar's strong performance was also due to massive unwinding of short dollar positions as the year end nears.

Some analysts see further room for such unwinding after speculators increased bets versus the dollar in the week ended Dec. 1 to the most since at least June 2008, CFTC data showed on Friday. [ID:nN04176803]

(Additional reporting by Nick Olivari; Editing by Andrew Hay)

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