* Janet Yellen to testify before Senate on Tuesday
* Safe-haven currencies weaken as Asian stocks rebound
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
By Kevin Buckland
TOKYO, Jan 19 (Reuters) - The dollar slipped from close to its highest in nearly one month on Tuesday as caution set in before U.S. Treasury Secretary nominee Janet Yellen testifies later, with traders keeping a close eye on the policies of the incoming Joe Biden government.
The greenback weakened against most major peers as stocks in Asia rallied, lifting risk sentiment and curbing demand for safe-haven currencies like the dollar and Japanese yen.
The dollar index =USD slipped about 0.1% to 90.708 in the Asian session, a day before U.S. President-elect Joe Biden is set to be inaugurated.
On Monday, the gauge ended 0.1% lower after earlier climbing to 90.94 for the first time since Dec. 21, as the Wall Street Journal reported Yellen will affirm a more traditional commitment to market-set currency rates in a Senate testimony on Tuesday. in stark contrast to outgoing President Donald Trump, who often railed against dollar strength.
The greenback has started the year with a near 2% rally against major peers, supported by a rise U.S. Treasury yields in response to Biden's plan for a $1.9 trillion pandemic relief package.
The dollar fell close to 7% last year on expectations U.S. monetary policy would stay ultra-loose and amid hopes for a post-pandemic global recovery.
Many analysts expect the dollar to resume its march lower this year.
"We've seen comments from Janet Yellen that she won't be pursuing a weak dollar policy per se, but that doesn't mean that the overall impact of Fed policy won't keep the dollar weakening," said Michael McCarthy, chief strategist at broker CMC Markets in Sydney.
"I suspect what we've been seeing in the dollar at the moment is a minor corrective rally in an overall downtrend."
The greenback has also been supported recently by an unwinding of bearish bets, with data showing that hedge funds piled up the biggest net short position since May 2011 in the week ended Jan. 12. Such large positions suggest that traders would be relatively more inclined to reduce their positions than add to already big bets.
The euro rose 0.2% to $1.2095 EUR=EBS , after dipping to $1.2054 for the first time since Dec. 2 on Monday, in subdued trading with U.S. markets closed for Martin Luther King Jr. Day.
The riskier Aussie dollar AUD= rose 0.3% to 77.082 U.S. cents, reversing a decline of more than 0.2% overnight.
The dollar gained 0.3% to 104.05 yen JPY=EBS , although still consolidating in a narrow range after reaching a one-month high of 104.40 last week.
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Currency bid prices at 12:39PM (339 GMT) Description
RIC
Last
U.S. Close Pct Change
YTD Pct
High Bid
Low Bid
Previous
Change
Session
Euro/Dollar
EUR=EBS
$1.2095
$1.2077
+0.16%
-1.00%
+1.2098
+1.2075 Dollar/Yen
JPY=D3
104.0150
103.6550
+0.39%
+0.75%
+104.0700 +103.6800 Euro/Yen
EURJPY=
125.81
125.22
+0.47%
-0.87%
+125.8600 +125.2100 Dollar/Swiss
0.8906
0.8913
-0.07%
+0.67%
+0.8911
+0.8902 Sterling/Dollar GBP=D3
1.3601
1.3588
+0.11%
-0.43%
+1.3613
+1.3581 Dollar/Canadian CAD=D3
1.2722
1.2754
-0.24%
-0.08%
+1.2753
+1.2721 Aussie/Dollar
AUD=D3
0.7713
0.7685
+0.38%
+0.28%
+0.7718
+0.7675 NZ
NZD=D3
0.7134
0.7113
+0.38%
-0.57%
+0.7139
+0.7107 Dollar/Dollar
All spots FX= Tokyo spots AFX= Europe spots EFX= Volatilities FXVOL= Tokyo Forex market info from BOJ TKYFX
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https://tmsnrt.rs/2RBWI5E
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