* Dollar falls vs euro, yen on Bernanke testimony
* Fed chief says continues to expect ultra low rates
* Housing data underscores fragility in U.S. economy
* Euro pares gains as SP may downgrade Greece"s rating
(Adds comments, details. Updates prices)
By Luciana Lopez and Vivianne Rodrigues
NEW YORK, Feb 24 (Reuters) - The U.S. dollar fell versusthe euro and yen on Wednesday after comments by U.S. FederalReserve chairman Ben Bernanke dampened speculation monetarypolicy tightening might be nearing.
An unexpected plunge in new U.S. home sales last monthfurther dampened investor sentiment and reinforced the lowrates outlook. Analysts said the housing figures, combined witha drop in a consumer confidence reading on Tuesday, underscorethe fragility of economic recovery.
"The (Federal Open Market Committee) continues toanticipate that economic conditions -- including low rates ofresource utilization, subdued inflation trends, and stableinflation expectations -- are likely to warrant exceptionallylow levels of the federal funds rate for an extended period,"read Bernanke"s prepared testimony to the House FinancialServices Committee on Wednesday. For details see[ID:nN23238973]
Sales of newly built U.S. single-family homes unexpectedlyfell to a record low in January, dropping 11.2 percent.Analysts had expected the figure to gain over the previousmonth. [ID:nN24169849]
The weak housing numbers showed consumers are stillstruggling, said Vassili Serebriakov, currency strategist withWells Fargo in New York.
"All combined, there are not a lot of reasons to buydollars today," he said. "The initial reaction has beennegative for the dollar.
The dollar fell 0.2 percent to 90.10 yen JPY= asBernanke"s comments subdued hopes U.S. interest rates wouldrise sooner rather than later -- a move that would boost thevalue of dollar-based assets.
The euro rose as high as $1.3626 EUR= earlier but lasttraded at $1.3550, up about 0.3 percent.
The single currency pared some of its gains after Standardand Poor"s said it may downgrade Greece"s BBB+ rating by one ortwo notches within a month, citing downside risks to growththat could hinder the country"s deficit-cutting plan.[ID:nLDE61N2KL]
The euro fell to a nine-month low of $1.3442 last week onconcerns about Greece"s public finances. A ratings downgrade ofGreece"s four largest banks by Fitch on Tuesday remindedinvestors of the financial woes facing the country.
Recent data showing German consumer sentiment was set todecline in March also added to negative euro sentiment, as dida weak German business sentiment Tuesday. [ID:nBAF003980]
In the United States, the focus of investors may now turnto economic reports on durable goods, weekly jobless claims andupcoming fourth-quarter GDP data.
Analysts at Macroeconomic Advisers said in a note theunexpected decline in new home sales in January suggests lowerfirst quarter sales and broker commissions than previouslyexpected. The firm"s tracking forecast of GDP growth in thefirst quarter is at 3.1 percent.
Elsewhere, sterling was little changed at $1.5412 GBP=after having tumbled on Tuesday when the Bank of England leftthe door open to more emergency measures and issued a downbeateconomic outlook.
(Additional reporting by Steven C. Johnson and NaomiTajitsu in London)
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