* Dollar inches up slightly before Bernanke testimony
* Bernanke discusses exit strategy in WSJ article
* Dollar stems recent slide, risk demand seen returning
(Adds detail, comment, updates prices, changes byline)
By Naomi Tajitsu
LONDON, July 21 (Reuters) - The dollar inched up on Tuesday, pausing from a slide to a six-week low against a currency basket as traders booked profits on the U.S. currency's losses ahead of Federal Reserve chairman Ben Bernanke's congressional testimony.
Currencies were little changed after an article by Bernanke in the Wall Street Journal that said the U.S. central bank has a strategy for removing accommodative measures once a recovery takes hold. But the central bank is not seen as in a hurry to end quantitative easing.
Mixed U.S. and European earnings reports garnered limited initial market reaction. U.S. bank State Street's earnings per share were lower than expected in the second quarter, while the performance of Dupont and others exceeded expectations.
Bernanke begins his twice-yearly testimony on the Fed's economic outlook and monetary policy before the U.S. House Financial Services Committee at 1400 GMT.
Some analysts said more reassurances that the U.S. economy is improving -- albeit slowly -- may prompt a pick up in risk demand and push the dollar lower.
"The focus is on whether Bernanke can maintain the balancing act of conveying that the Fed is thinking about an exit strategy but won't be initiating it it any time soon," said Jeremy Stretch, strategist at Rabobank in London.
"If he can perform that act, the short-term risks are for a higher euro/dollar."
In the WSJ, Bernanke said the Fed's exceptionally easy policies would be warranted "for an extended period", but added the huge amounts of money pumped into the economy will not reduce its ability to push borrowing costs higher when needed.
At 1143 GMT, the euro was down slightly on the day at $1.4220, but remained near a six-week high of $1.4250 hit on trading platform EBS the previous day. U.S. stock futures inched up 0.2 percent, after trading largely flat in European trade.
The dollar index was also steady at 78.918, hovering close to a six-week low of 78.799 touched on Monday.
RISK APPETITE
Traders sold currencies seen to be higher risk, including sterling and the Australian and New Zealand dollars. Sterling was the day's biggest loser, falling as much as nearly 1 percent to $1.6385 and retreating from a three-week high as the pound was stung by dismal UK public finances data.
The dollar was little changed at 94.20 yen, but the Japanese currency rose broadly on the crosses, pushing sterling down as much as 1 percent, while the Australian and New Zealand currencies also fell against the yen.
The Canadian dollar inched up, with the U.S. dollar down 0.2 percent at C$1.1038, before a Bank of Canada policy decision at 1300 GMT, where it is expected to leave rates at a historic low 0.25 percent..
Traders were cautious about risk before Bernanke speaks, but analysts said that overall, market remained tilted in favour of risk appetite following mixed U.S. earnings for the second quarter and a last-minute rescue deal for U.S. lender CIT Group.
"CIT has been rescued, we've had better earnings, better economic data and risk appetite is up - this is the story driving the market at the moment," CMC Markets analyst James Hughes said, adding that this cold push the dollar lower. (Additional reporting by Jessica Mortimer, editing by Ron Askew)