* Dollar down on day, but looking steadier early in Europe
* Aussie, kiwi lead gains after Yellen testimony
* Eyes on more Fed comment on Thursday
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Patrick Graham
LONDON, July 13 (Reuters) - The Australian and New Zealand dollars were the biggest beneficiaries of a slide in their U.S. equivalent on Thursday after testimony from U.S. Federal Reserve chair Janet Yellen bolstered a global stock market rally that dates back 7 years.
Against the basket of currencies that measures its broader strength, the U.S. dollar fell back to its lowest since last October in Asian trading, undoing all of a recovery last week driven by generally higher global bond yields.
The currency was steadier in early deals in Europe but still another quarter of a percent lower since the end of U.S. trading on Wednesday.
The kiwi and Aussie dollars rode out a poor set of New Zealand data to stand 0.6 percent higher on the day, leading gains for the G10 group of developed world currencies along with the Swedish crown.
"The market was not really buying the dollar even during the hottest moments of the past two weeks," said Athanasios Vamvakidis, head of G10 FX strategy with Bank of America Merrill Lynch in London.
"Dollar positioning is short and yesterday's testimony just confirmed what the market believed: that the Fed is not going to be able to be as hawkish as they are suggesting."
By 0740 GMT, the dollar index was trading 0.2 percent lower at 95.588, having hit an 8-month low of 95.464. It dipped 0.15 percent to $1.1430 per euro but was roughly flat at 113.09 yen.
The U.S. currency has been falling steadily since hitting a 14-year high at the start of this year and a number of major banks who had previously backed it to gain further have called its longer-term rally as over.
But against that is the continuing contrast in interest rates - and the outlook for them - in the United States and Europe and Japan.
U.S. 10-year interest rates are 4 times - or almost 2 full percentage points - higher than those in Germany.
Yellen sounded a cautious note on inflation going forward, putting the focus on U.S. consumer price index (CPI) numbers due on Friday. Economists polled by Reuters expect the June core CPI figure to have risen 0.2 percent month-on-month, from a gain of 0.1 percent the previous month.
"Our data suggests that U.S. inflation is actually picking up again," said Bart Wakabayashi, branch manager for State Street Bank and Trust in Tokyo. "The Fed appears to still be in a position to continue hiking rates."
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Writing by Patrick Graham; Editing by Toby Chopra)