FOREX-Dollar gains as Bernanke soothes financial markets

* Dollar rallies after Bernanke comments

* Bernanke says may keep Fed's emergency lending open

* Mood in financial markets still cautious (Updates prices, adds comments, byline)

By Gertrude Chavez-Dreyfuss

NEW YORK, July 8 (Reuters) - The dollar rebounded on Tuesday after Federal Reserve Chairman Ben Bernanke said the U.S. central bank may keep an emergency lending facility open beyond the end of the year for big Wall Street firms

The U.S. currency struggled earlier, particularly against the yen, which gained broadly as global economic jitters weighed on world stock markets and stoked risk aversion.

Bernanke on Tuesday said the Fed was considering several options, including extending the duration of the central bank's facilities for primary dealers beyond year-end should the current unusual circumstances persist in the dealer funding markets. For details, see [nN08487125].

"What Bernanke's saying is helping Wall Street, and that's helping the dollar," said Boris Schlossberg, senior currency strategist at DailyFX.com in New York. "Everybody thinks the Fed's number one mandate is to fight inflation, but it's actually to make sure the banks are solid.

"What they're trying to do is avoid a panic on Wall Street, and in the near term that's dollar-positive," he added.

The dollar rose to 107.22 yen JPY=, recovering from session lows at 106.26. The euro widened losses against the dollar to $1.5663 EUR=, down 0.4 percent from late Monday.

Credit worries resurfaced on Monday after a Lehman Brothers report said a pending accounting change could force Fannie Mae (FNM.N) and Freddie Mac (FRE.N) to raise a combined $75 billion in capital. [ID:nN07435475] The report triggered a plunge in the stocks of the two companies, dragging down the broader U.S. market.

The yen usually gets a bid in times of heightened stress in financial markets, as investors sell higher-yielding risky assets.

Following Bernanke's comments, U.S. stock futures turned higher on Tuesday, pointing to a higher open. (Additional reporting by Steven C. Johnson; Editing by Jonathan Oatis)