NEW YORK – The dollar edged higher Tuesday after Federal Reserve Chairman Ben Bernanke assured investors that the central bank will be able to reel in its economic stimulus and prevent a flare up of inflation once a recovery is firmly rooted.

The 16-nation euro slipped to $1.4195 from $1.4221 late Monday after trading near seven-month highs against the dollar as optimism about corporate earnings have fueled investors' appetite for risk.

The British pound fell to $1.6432 from $1.6533, while the dollar bought 93.63 Japanese yen, down from 94.23 yen late Monday.

Gains in equity markets have helped weaken demand for the dollar lately as investors exit the traditional safe haven of the U.S. currency.

Bernanke said Tuesday the economy is still on track to recover this year, but slowly, and predicted rising unemployment. He said the Fed will hold the key bank lending rate at a record low near zero for an "extended period."

The Fed has kept the key U.S. rate at a range from zero to 0.25 percent since December. Economists predict rates will stay at record lows through the rest of this year.

Investors found assurance in Bernanke's remarks that inflation would remain at bay.

"The Fed may have helped ease tensions about inflation given the outlook and that there are clear plans for an exit strategy even if not adopted yet," Brown Brothers Harriman currency analyst Marc Chandler wrote in a note to investors.

Also Tuesday, Canada's central bank kept its key interest rate steady as expected and said the country's economy is beginning to recover from recession.

The Bank of Canada has pledged to keep its key rate at the lowest possible level until the spring of 2010. The rate, which remains at 0.25 percent, is used by banks for one-day loans to other financial institutions.

The dollar inched up to 1.1073 Canadian dollars from 1.1070.

In other late trading, the dollar slipped to 1.0682 Swiss francs from 1.0693 francs late Monday.