* Economy minister suggests yen has weakened enough
* BOJ meeting, Bernanke's congressional testimony in focus
NEW YORK May 20 (Reuters) - The yen rose from a 4-1/2-year low against the dollar on Monday after Japan's economy minister suggested the currency might have weakened enough, prompting some investors to pare bets against it.
The yen's slight reprieve came after Economy Minister Akira Amari said its excessive strength had largely corrected and further weakness could damage Japan's economy. But analysts said any sharp dip in the dollar against the yen was a buying opportunity as Tokyo was committed to easier monetary policy.
But while the dollar fell sharply on Amari's comments and remained down on the day it was off the session low.
"What is remarkable about today's price action is that dollar/yen refused to buckle despite Mr. Amari's attempts to talk it down indicating the strength of the momentum in the pair," said Boris Schlossberg, managing director of FX Strategy at BK Asset Management in New York. "Still dollar/yen is clearly overbought and is due some pause and correction in the near future."
The dollar was last 0.6 percent lower at 102.56 yen, having hit a low of 102.19. The euro lost 0.5 percent to 131.85 yen with the low at 131.02 on Monday.
Last Friday, the dollar reached a high of 103.30 yen.
The Bank of Japan begins a two-day policy meeting on Tuesday. It is expected to keep policy unchanged but could tinker with its bond-buying plan to curb a recent rise in Japanese yields.
"Any dip in dollar/yen towards 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.
Tan said short-term momentum indicators such as the 14-day relative strength index showed the dollar was overbought against the yen, hence a pullback was due.
Investors will look to Federal Reserve Chairman Ben Bernanke's testimony to Congress on Wednesday. He has shown no signs of wanting to taper the Fed's bond-buying plan soon, but the program may be slowed later this year as the U.S. labor market improves.
"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 note.
A softer dollar pushed the euro 0.1 percent higher to $1.2855, off a six-week low of $1.2795 touched on Friday. But additional gains would be limited given strong expectations the European Central Bank will cut its deposit rate - at which banks park surplus cash with it - 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 Chinese growth and a protracted euro zone recession.
Some US$3.1 billion in euros changed hands on Reuters Dealing on Monday and US$2.4 billion in yen.