* Investors scale back risk tolerance
* But market sentiment not necessarily negative
* Aussie off 5-week high, kiwi off 9-month high
By Kaori Kaneko
TOKYO, July 22 (Reuters) - The yen edged up against other major currencies on Wednesday after Federal Reserve Chairman Ben Bernanke offered a cautious view on the U.S. economy, reducing investor risk appetite.
Renewed worries about CIT Group Inc also made investors wary and helped lift the yen, with the troubled U.S. lender warning on Tuesday it could file for bankruptcy protection if bondholders reject a debt restructuring.
But market players said that while risk appetite had waned somewhat the market was not necessarily becoming risk averse and that currencies for the most part remained stuck in ranges, with no decisive trend in sight.
"Market players remain cautious and they are unable to build large positions," said Kwang-ja Kim, deputy general manager at Shinsei Bank.
Bernanke, in testimony before the House Financial Services Committee, said U.S. unemployment was likely to remain high into 2011, which he warned could undermine consumer confidence and derail a recovery.
U.S. Treasury prices rose sharply after Bernanke indicated the economy was still too weak to tighten monetary policy any time soon and traders said the fall in yields had weighed on the dollar.
"Bernanke's comments were appropriate. People had excessive expectations for the exit strategy and it was an over-reaction to flock to buy bonds," said a trader at a Japanese trust bank.
The dollar index, a gauge of its performance against six major currencies, was steady at 78.957 after touching 78.591 on Tuesday and Wednesday, its lowest since June 3.
It fell to its lowest in seven weeks against the euro on Tuesday at $1.4278, close to its low for the year, but recovered to $1.4203 by Wednesday.
Against the yen it eased 0.1 percent to 93.69 yen, after shedding about 0.5 percent on Tuesday.
Bernanke speaks again on Wednesday, appearing before the Senate Banking Committee at 1400 GMT.
"The currency market is trying to find a direction as there is a mixture of positive and negative factors," said Ayako Sera, a market strategist at Sumitomo Trust & Banking.
"There is relief about U.S. corporate earnings so far, but there are still doubts about whether firms will be able to make a sustained recovery," she said.
U.S. stocks rose on Tuesday on a solid profit from Caterpillar Inc but the gains were limited as some investors paused following a recent earnings-fuelled run-up.
Asian stocks rose but their gains were limited.
The currency market took in its stride remarks from China urging a responsible U.S. policy and a stable dollar.
China's Assistant Minister of Finance Zhu Guangyao said China hoped the U.S. would conduct fiscal and monetary policy responsibly and would gradually reduce its budget deficit.
AUSTRALIAN INFLATION SLOWS, EURO, STERLING SLIP
The Australian dollar fell 0.2 percent to $0.8159 after hitting five-week high of $0.8193 on Tuesday. Against the yen it was down 0.1 percent at 76.42 yen after touching a three-week high of 77.19 yen the previous day.
Australian consumer price inflation slowed to its lowest annual pace in a decade last quarter. But measures of underlying inflation favoured by the central bank showed price pressures were proving more stubborn than many had hoped and reinforced speculation Australia is done with cutting interest rates.
The euro fell 0.3 percent from U.S. late trade on Tuesday to 133.02 yen.
Sterling fell 0.3 percent to 153.64 yen and slipped 0.3 percent to $1.6399.
The New Zealand dollar slipped 0.2 percent to $0.6554 after rising to $0.6610 on Tuesday, its highest since early October. It dipped 0.1 percent to 61.40 yen. (Additional reporting by Aiko Hayashi; Editing by Michael Watson)