FOREX-Dollar falls vs yen, struggles on Bernanke

* Dollar falls vs yen, struggles vs euro

* Bernanke dashes expectations of early stimulus exit

* More dollar shorts to be covered, but dollar seen weak

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By Naomi Tajitsu

LONDON, Dec 8 (Reuters) - The dollar fell against the yen and struggled versus the euro on Tuesday after comments from Federal Reserve Chairman Ben Bernanke cooled speculation of an early rise in U.S. interest rates.

The U.S. currency gained some ground against the euro early in Europe as a trickle of dollar short covering continued in the wake of better-than-expected U.S. jobs data last week, but the dollar stayed on the back foot as another senior Fed official said the U.S. economy remained weak.

Bernanke said the U.S. economy still faced headwinds and unemployment could stay high for some time, playing down the impact of Friday's payrolls report and helping send yields on shorter-dated Treasuries lower. [ID:nFEDAHEAD].

William Dudley, president of the New York Federal Reserve, later said the economy was still weak and reiterated that rates would remain low for an extended period. [ID:nNYS007598]

"Bernanke's speech was dovish, and he suggested there would not be an immediate rate rise," said Marcus Hettinger, global currency strategist at Credit Suisse in Zurich.

"There are more short dollar positions to cover, but we still see the currency weaken."

Dollar gains have petered out following a rally from late last week, when a surprisingly strong reading of U.S. employment had triggered some expectations the Fed may start to normalise ultra-easy monetary policy earlier than expected.

By 0847 GMT, the euro was down slightly on the day at $1.4810, having slipped to around $1.4780, but above a five-week low of $1.4756 hit on Monday.

Traders awaited German industrial output data due at 1100 GMT, which is expected to show a 1.0 percent rise in October from the previous month. Data last month showed output grew in the third quarter at its fastest rate since reunification.

Some analysts said a weak reading may put some selling pressure on the euro.

The euro offered limited initial reaction to comments from European Central Bank President Jean-Claude Trichet, who said on Tuesday said the euro zone faced a bumpy road to recovery. [ID:nWEA4639]

On Monday, he said the ECB could pause the process of withdrawing emergency support measures for the economy if needed. [ID:nGEE5B60ZI]

Against the yen, the dollar fell half a percent to 89.01 yen. The dollar hit a 14-year low of 84.82 yen at the end of November as worries about Dubai's debt saw investors unwind risk trades funded in yen, which then sent dollar/yen down.

"It was unreasonable that U.S. non-farm payrolls for a single month alone raised such optimism, as concerns persist over Dubai debt problems and the U.S. banking sector is not necessarily in good condition," said Jun Kato, senior chief analyst at Shinkin Central Bank Research Institute in Tokyo.

A Dubai newspaper reported state-controlled Dubai World was discussing a new date with its bank creditors for debts maturing on Dec. 14. [ID:nGEE5B701Y]

Sterling fell roughly half a percent to the day's low of $1.6376 as the market awaited the UK government's pre-budget report on Wednesday, which is expected to highlight the dismal state of the Britain's finances.

(Additional reporting by Tokyo Forex Team, editing by xxx)