* Dollar off two-week lows vs currency basket
* Yellen emphasises continuity with policy approach taken by Bernanke
* Aussie outperforms, China trade data next risk event
By Ian Chua
SYDNEY, Feb 12 (Reuters) - The dollar held off a two-week low against a basket of major currencies early on Wednesday, having rebounded after Federal Reserve Chief Janet Yellen offered no surprises on policy in her inaugural Congressional testimony.
In fact, the core message on policy from the new chief of the world's most powerful central bank was that of continuity with the approach taken by her predecessor, Ben Bernanke.
For markets, the bottom line was that the Fed remained committed to winding down its extraordinary stimulus measures for now.
The dollar index drifted up to 80.632 from a low of 80.448. Against the yen, the greenback edged up to a 1-1/2 week high of 102.71.
The euro, meanwhile, retreated to $1.3639 from a near two-week high of $1.3684. But it managed to firm against the yen to 140.31, a high last seen in late January.
Despite the modest bounce in the greenback, Westpac currency strategist Richard Franulovich warned the near term prognosis looked challenging.
"U.S. retail sales data later this week for example is likely to underwhelm given known weaker auto and chainstore sales," he said.
But the best performer among major currencies was the Australian dollar, which jumped 1 percent to a one-month high of $0.9048. It last stood at $0.9032.
The Aussie rose on the back of upbeat local data on Tuesday and extended gains amid a general improvement in risk sentiment that saw Wall Street climb for a fourth session.
Whether the Aussie can continue its winning ways depends very much on trade data out of China, Australia's single biggest export market, traders said.
The data is due around 0200 GMT and expectations are for export and import growth to have cooled in January. The risk is the Lunar New Year holiday effect may exaggerate any slowdown .
This could see the Aussie quickly dip back below 90 U.S. cents as investors cash in recent gains.
For sterling bulls, the Bank of England's quarterly inflation report due later on Wednesday will be closely watched.
The report gives the BoE a chance to tweak its forward guidance on policy and firm up a message that interest rates will not rise until well into next year.
Such an outcome could give pause to sterling, which has rebounded to $1.6453, from a 17-week trough of $1.6252 plumbed a week ago. It was not far from a near three-year peak of $1.6667 set late last month.