* Dollar at lowest versus euro since Jan. 29
* Investors eye Yellen for clues on Fed bond-buying cuts
* Aussie helped by business survey
By Laurence Fletcher
LONDON, Feb 11 (Reuters) - The dollar fell to its lowest level in almost two weeks on Tuesday ahead of congressional testimony by new U.S. Federal Reserve chief Janet Yellen that could give clues as to how quickly the Fed will cut back its programme of stimulus.
The Australian dollar rose to its highest point in almost a month, helped by an upbeat business survey and by buying from hedge funds, who have been betting against the Aussie for months but who are now taking profits, traders said.
Volumes were low due to a holiday in Japan and a lack of major economic data, holding most currencies in recent ranges.
Yellen’s first public test as chair of the world’s most powerful central bank will see lawmakers ask how committed she is to winding back the emergency bond-buying the Fed has used to prop up a fitful economic recovery.
Analysts generally assume Yellen will reiterate the bank will continue to rein in purchases as long as the economy improves as expected, while reaffirming a commitment to keeping rates low for a long time to come.
But her testimony follows two months of lower than expected employment growth and some other softer data which have raised a question mark over the pace of America’s recovery even if most investors for now are blaming the weather.
The latest deadline for raising the U.S. government borrowing limit and avoiding default is also looming.
“A lot will hinge on today,” said Simon Smith, FxPro’s head of research.
“She’s known as a dove, but it’s the first time the question (arises) of whether she wants totally to continue this line from her predecessors or shake things up. I don’t think she will (shake things up), but it’s a bit of a risk event.”
A stronger dollar was one of the central bets of most banks and analysts this year, judging the Fed’s cut in bond-buying and resulting higher yields would draw much of the funds it has sent coursing through the world economy back into the dollar.
The U.S. currency’s failure to deliver on that seems due in part to the European Central Bank’s baulking of expectations it would loosen its own policy further and in part from an emerging sell-off that has strengthened the euro, yen and dollar across the board.
“The market has taken upon itself, because U.S. economic recent performance has been relatively poor, that this means there could be some slowdown in tapering or Yellen could be relatively dovish,” said Paul Chappell, CIO of UK-based hedge fund firm C-View.
“It might be the market gets a bit of a surprise. (Unless) we get a really significant bout of weak data, it looks like the Fed is going to keep on tapering.”
The dollar index fell as low as 80.47, its lowest in almost two weeks, and was last down 0.2 percent at 80.482. The euro also touched almost two week highs of $1.36835.
The Aussie has been supported in recent days by comments from the central bank, which last week all but shut the door on further rate cuts, citing improving economic conditions and a pick-up in inflation.
National Australia Bank’s measure of Australian business conditions on Tuesday rose to its highest in nearly three years in January.
But while hedge funds were buying, there was also nervousness ahead of unemployment data on Thursday, which some fear could be poor. On Monday Toyota said it would stop making cars in Australia, at loss of about 2,500 jobs, by 2017. The Aussie rose around 1 percent to $0.9039 while the New Zealand dollar gained 0.7 percent.