NEW YORK (Reuters) - The dollar slipped on Thursday after Federal Reserve Chairman Ben Bernanke told a congressional committee more interest rate cuts may be necessary as the U.S. economic outlook has worsened.

In testimony before the House of Representatives' Budget Committee, the Fed chief reiterated a bleak assessment of the economy's health he delivered last week.

Bernanke's comments were widely seen as a signal that the U.S. central bank would slash rates by a hefty half-percentage point at month's end, which would undermine the attractiveness of dollar-denominated assets.

Separately, a survey showed factory activity in the U.S. Mid-Atlantic region contracted dramatically in January, reinforcing fears of recession.

"I still think that 50 basis points is the best we'll get. As much as we need a 75-basis point rate cut, we'll only get a Band-Aid from Bernanke rather than a real solution," said Kathy Lien, chief currency strategist, at DailyFX.com in New York.

Early afternoon in New York, the dollar was down 0.4 percent against the yen at 107.06, though it was well off the session low of 106.61.

However, Bernanke told lawmakers that he does not expect the U.S. to slide into a recession.

"The U.S. economy remains extraordinarily resilient," he said. "We currently see the economy as continuing to grow, but growing at a relatively slow pace, particularly in the first half of this year." Continued...

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