FOREX-Dollar awaits Yellen's testimony, Draghi may limit euro's gains

* Euro rises ahead of ECB's Draghi speech in Strasbourg

* Bank of Japan, China data feature this week

* Fed's Yellen to testify at Congress on Tuesday, Wednesday

By Anirban Nag

LONDON, July 14 (Reuters) - The dollar edged up against the

yen on Monday, though stayed well within recent ranges, as

investors awaited Federal Reserve Chair Janet Yellen's

congressional testimony for cues on the outlook for U.S.

monetary policy.

U.S. Treasury yields have fallen and Fed Funds futures

indicate investors are pushing back policy tightening

expectations after Fed minutes indicated the central bank is not

in a hurry to raise rates. So, a lot will depend on what Yellen

says, especially on the back of an improvement in U.S. data in

the second quarter.

In the euro zone, European Central Bank President Mario

Draghi addresses a European Parliament committee in Strasbourg

and the single currency's recent strength against the dollar

could be mentioned. ECB policymakers have in the past said that

the exchange rate's strength worsens the disinflationary

situation in the euro zone.

The euro was up 0.2 percent at $1.3635, lifted by

talk of buying by long-term investors in London trade, while the

dollar was up 0.1 percent against the yen at 101.50. The

euro rose 0.3 percent against the yen to 138.36 yen,

recovering from last week's five-month low of 137.50 yen.

"Investors are hoping for Yellen to say something

substantial. The Fed, it seems, will tolerate a bit more

inflation before it will tighten rates," Commerzbank (Xetra: CBK100 - news) currency

strategist Peter Kinsella said.

"The key is U.S. yields and if they are not moving higher,

it's unlikely to translate into anything substantial for the

dollar," he said.

Investors are also awaiting a policy review by the Bank of

Japan on Tuesday, though it is widely expected to maintain its

policy and its broader economic outlook.

The BOJ may trim its economic growth forecast for the

current year, sources familiar with its thinking said,

reflecting soft exports and a bigger-than-expected slump in

household spending after a sales tax hike in April, though the

change would not tip any policy changes to come.

"There hasn't been significant structural change that

requires measures from them," State Street Global Markets' head

of foreign exchange Bart Wakabayashi said.

"I'm surprised dollar-yen is as bid as it is," he said,

referring to what he said was a lack trading incentives.

Demand for the safe-haven yen faded on Friday as concerns

eased about the health of Portugal's largest bank and its impact

on the euro zone financial system.

Speculators increased their bullish bets on the U.S. dollar

in the latest week, with the value of the dollar's net long

position rising to $10.34 billion in the week through July 8,

according to the data from the Commodity Futures Trading

Commission released on Friday.

Meanwhile, the Australian dollar stabilised, after having

fallen late on Friday as the country's central bank chief again

said the currency was too strong.

In an interview with the Weekend Australian published late

last week, Governor Glenn Stevens reiterated that some investors

may be underestimating the risk of "a material decline" in the

currency at some point.

The Aussie last traded at $0.9398, having dipped as

low as $0.9370. Traders said a slew of Chinese economic data on

Wednesday could have a bearing on the Australian dollar, given

the Asian powerhouse is Australia's largest trading partner.

(Additional reporting by Lisa Twaronite in TOKYO; Editing by

Louise Ireland)