4 Min Read
* Trump national security aide Flynn resigns over Russian contacts
* Yellen to testify to Congress on Tuesday, Wednesday
* Dollar edges down vs yen but well above last week's lows
* French election concerns continue to plague euro
TOKYO, Feb 14 (Reuters) - The dollar extended losses on Tuesday after President Donald Trump's national security adviser Michael Flynn quit, with investors waiting to see whether Federal Reserve Chair Janet Yellen offers clues to the likely pace interest rate increases in her congressional testimony.
The dollar weakened 0.3 percent on the day to stand at 113.43 yen, off Monday's high of 114.17 but well above a 10-week low of 111.59 yen touched a week ago.
It touched its session low of 113.39 yen shortly after news that Flynn resigned late on Monday under scrutiny over whether he discussed the possibility of lifting U.S. sanctions on Russia before Trump took office.
"The news weighed on the dollar against the yen because it's a hard situation to understand, and also to understand what kind of broader fallout it will have," said Kumiko Ishikawa, FX market analyst at Sony Financial Holdings.
Slumping Japanese equities also put upward pressure on the yen. The Nikkei stock average was down 0.7 percent, extending losses in afternoon trading after Toshiba Corp unexpectedly delayed the release of its quarterly earnings and details of a multi-billion dollar writedown to its nuclear business.
The dollar index was down 0.1 percent on the day at 100.84 , edging away from Monday's high of 101.11, its highest level since Jan. 20.
Yellen will present the U.S. central bank's semi-annual report on monetary policy and the economy in testimony to the Senate Banking Committee on Tuesday, followed by a the semi-annual monetary testimony before the House Financial Committee on Wednesday.
"People are just waiting for Yellen's testimony, and depending on what she says, the dollar could test the upside again," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.
"But a few Japanese exporters are selling dollars at the moment, disappointed that it didn't go even higher after the weekend meeting" of U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe, who apparently did not discuss currency policy or trade protectionism, Ogino said.
Abe said on Tuesday he agreed with Trump that currency issues should be left for the finance leaders of each country to discuss.
Dallas Federal Reserve Bank President Robert Kaplan, a voter this year on the Fed's policy-setting panel, said on Monday in remarks prepared for posting to the Dallas Fed website that the U.S. central bank should act soon to raise rates or risk having to abandon its plan to do so slowly.
"Yellen does not need to say anything in detail. I think she'll be very cautious, so currencies might not move so much," said Masashi Murata, senior strategist at Brown Brothers Harriman.
"She might suggest some possibility of the Fed hiking rates in March, but I think that risk is very small," he added.
Interest rates futures showed investors pricing in only about a 1 in 5 chance the Fed will increase rates at its meeting next month, according to CME Group's FedWatch program.
The dollar also got a lift from Trump's promise last week of a "phenomenal" tax plan that the White House said would include tax cuts for businesses and individuals. The hopes raised by his comments helped lift U.S. stocks to record highs on Monday.
The euro, which has come under pressure in recent sessions as France's election campaign has heated up, was up 0.1 percent at $1.0611.
French presidential frontrunner Emmanuel Macron is being targeted by Russian media and internet attacks from within Russia with the goal of helping the election campaigns of his pro-Moscow rivals, his party chief said on Monday.
Reporting by Tokyo markets team; Editing by Simon Cameron-Moore