* Japan minister suggests yen has weakened enough
* BOJ meeting, Bernanke's congressional testimony in focus
* Dollar retreats from near three-year peak vs basket of currencies
By Wanfeng Zhou
NEW YORK, May 20 (Reuters) - The dollar fell against the euro and yen on Monday as traders pared back expectations Federal Reserve Chairman Ben Bernanke would hint at tapering U.S. bond purchases this week.
Market focus is shifting to Bernanke's testimony to Congress on Wednesday after recent comments by Fed officials have fueled speculation the U.S. central bank may trim its bond purchases sooner than expected.
The yen rebounded from a 4-1/2-year low against the dollar after Japan's Economy Minister Akira Amari said the yen's excessive strength had largely corrected and that further weakness could damage Japan's economy.
"We may have been moving a little bit too early," said Andrew Dilz, foreign currency trader at Tempus Inc in Washington. "I see a continuing of this exact pace of current purchases at least through the end of the summer, which is going to put some pressure on the dollar."
The dollar index, which tracks its value against a basket of currencies, fell 0.6 percent to 83.788, retracing from a near three-year peak notched on Friday.
Speculation had grown that the beginning of the end of the Fed's $85 billion per month bond-buying program might come sooner than many investors expected if recent gains in the U.S. labor market hold.
The roughly 50 percent jump in monthly job creation since the program began has raised at least some chance the Fed could start to ratchet back its buying as early as next month. The central bank next meets to debate U.S. monetary policy on June 18-19.
Chicago Fed President Charles Evans said the U.S. central bank could keep up its current level of bond-buying stimulus, but may end it abruptly in the autumn if by then it was sure that the labor market was on a solid footing.
The dollar fell 0.9 percent to 102.25 yen, having hit a session low of 102.16, according to Reuters data. Last Friday, the dollar touched a high of 103.30 yen.
The euro lost 0.6 percent to 131.76 yen and its low on Monday at 131.02 was the lowest since May 9.
The Bank of Japan, which begins a two-day meeting on Tuesday, is expected to keep policy unchanged but could tinker with its bond-buying plan to curb a recent rise in Japanese yields. Analysts said the yen looked set to resume its recent weakening as Tokyo was committed to easier monetary policy.
"Any dip in dollar/yen toward 101 or 102 yen is a buy as Japanese policymakers are clear that there will be more asset purchase or quantitative easing in the longer term," said Alvin Tan, a currency strategist at Societe Generale in London.
He also said short-term momentum indicators such as the 14-day relative strength index showed the dollar was overbought against the yen, meaning a pullback was due.
The euro rose 0.4 percent to $1.2887, having touched a session peak of $1.2894, and rebounding from a six-week low of $1.2795 touched on Friday.
But some analysts say additional gains would be limited, given strong expectations the European Central Bank will cut its deposit rate - the rate paid on surplus cash parked by banks - below zero in coming months.
JPMorgan lowered its second-quarter euro/dollar forecast to $1.30 from $1.32 to reflect a shallower U.S. downturn, slower growth in China and a protracted euro zone recession.
Any hint of the Fed winding down its asset purchases could add the dollar's momentum, analysts said.
"We are dollar bulls and expecting more pieces of the puzzle to fall into place - most notably serious speculation over the normalization of Fed policy, which can drive U.S. money market rates and the dollar substantially higher," Chris Turner, head of currency strategy at ING in London, wrote in a research note.
The Fed is slated to release the minutes of its most recent policy meeting on Wednesday.
The dollar weakened against other major currencies, with sterling up 0.6 percent on the day and the Australian dollar up nearly 1 percent. The New Zealand dollar rallied 1.3 percent against the greenback.