* 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 rose 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.
He also said benchmark U.S. interest rates will stay low for a long time and expressed concern about the U.S. budget deficit.
"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.
The euro fell 0.4 percent from U.S. late trade on Tuesday to 132.82 yen. The European single currency slipped 0.2 percent to $1.4193, after touching $1.4278 on trading platform EBS the previous day, its highest since June 3.
The dollar was down 0.2 percent at 93.58 yen.
The dollar index, a gauge of its performance against six major currencies, was steady at 78.922 after touching 78.591 on Tuesday and Wednesday, its lowest since June 3.
The market took in its stride remarks from China that it is urging a responsible U.S. policy and a stable dollar.
China's Assistant Minister of Finance Zhu Guangyao said on Wednesday that China hopes the U.S. will conduct fiscal and monetary policy responsibly and will gradually reduce its budget deficit.
Commodity-related currencies such as the Australian and the New Zealand dollars slipped but hovered not far from Tuesday's highs.
The Australian dollar fell 0.1 percent to $0.8164 after hitting five-week high of $0.8193 on Tuesday. Against the yen it was down 0.2 percent at 76.37 yen.
The Australian consumer price index (CPI) rose only a moderate 0.5 percent in the second quarter as expected. The annual pace of inflation slowed to a decade low of 1.5 percent.
The New Zealand dollar slipped 0.1 percent to $0.6558 after rising as high as $0.6610 on Tuesday, its highest since early October. It dipped 0.2 percent to 61.32 yen.
Bernanke will give twice-yearly testimony on the economic outlook and monetary policy before the Senate Banking Committee later on Wednesday. (Editing by Edwina Gibbs)