* Euro's upside seen intact; dollar struggles
* Fed's Bernanke expected to stay cautious
* Euro seen remaining supported ahead of ECB meeting Thurs
* Euro targets 2011 high of $1.3862 before test of $1.40
(Updates prices, changes byline, dateline; previous TOKYO)
By Jessica Mortimer
LONDON, March 1 (Reuters) - The dollar struggled to regain its footing on Tuesday, staying near a three-and-a-half month low against a currency basket on the view that the U.S. Federal Reserve will stick with loose monetary policy.
The euro hovered close to its 2011 high of $1.3862 against the dollar and traders said a catalyst for more gains could come if U.S. Federal Reserve Chairman Ben Bernanke continues to suggest U.S. monetary policy will remain extremely loose.
Bernanke is expected to stay cautious about the economy at his semi-annual testimony before the Senate Banking Committee at 1500 GMT, in contrast with other central banks who are focused on rising inflation.
The euro was also expected to remain supported ahead of a European Central Bank policy meeting on Thursday, where it may signal a willingness to raise rates.
"Upside in euro/dollar is likely to depend on Bernanke. The first level is the 2011 high, and once this breaks we could see a test of $1.40 but for this to happen we would need Trichet to be quite hawkish on Thursday," said Roberto Mialich, currency strategist at Unicredit in Milan.
The euro was up 0.25 percent at $1.3834, hovering near a one-month high of $1.3857 hit on trading platform EBS on Monday. A break of its February high at around $1.3862 would mark its highest level since early November.
Traders said the single currency could struggle to extend gains without a further catalyst, with real money offers reported around $1.3830-50 ahead of further offers around $1.3865-70 and barriers at $1.3900, $1.3950 and $1.4000.
However, buyers were seen around $1.3780-$1.3800 which were helping to prop up the euro.
The dollar index, which tracks its performance against a basket of major currencies, edged down 0.1 percent to 76.793, close to a 3-½ month low of 76.756 hit on Monday.
"If we get any indication that he (Bernanke) is going to complete the QE2 measures all the way through ... I think it is quite possible we will see further dollar weakness," said Andrew Robinson, FX market strategist for Saxo Bank in Singapore, referring to the Fed's $600 billion bond-buying programme.
Sterling rallied to a 13-month high against the dollar of $1.6327, supported by market expectations the Bank of England will raise interest rates before the Fed.
YEN, SWISS FRANC DIP
The dollar edged up against the Swiss franc and the yen, however, as concern about troubles in oil-producing countries in North Africa and the Middle East eased in the absence of any significant escalation of tensions while oil prices steadied at higher levels.
Uncertainties in the region remained, however, and analysts said if heightened tensions resume investors could again buy Swiss franc and yen, the two currencies which have tended to benefit most when market players have sought safety.
Versus the yen, the dollar rose 0.5 percent to 82.18 yen, hovering near the middle of its roughly 81 yen to 84 yen range seen over the past month. Traders cited heavy buying of dollar/yen by Japanese exporters. The dollar also rose 0.15 versus the Swiss franc to 0.9304 francs.
Kimihiko Tomita, head of foreign exchange at State Street Global Markets in Tokyo, said it may be premature to expect major currencies to start forming strong trends at this point because many long-term investors are taking a wait-and-see stance.
On one hand, global institutional investors are worried that world economic growth could suffer if unrest in Libya spreads to Middle East oil producers and causes further surges in oil prices, Tomita said.
"It is hard to choose between one or the other, so there is no need right now to make a bet, and long-term players are taking a pause," Tomita said.
The Australian dollar was steady at $1.0181 after the Reserve Bank of Australia kept interest rates unchanged at 4.75 percent, as expected. (Additional reporting by Ian Chua in Sydney and Masayuki Kitano in Singapore; editing by Stephen Nisbet)