* Economy minister suggests yen has weakened enough
* BOJ meeting, Bernanke's Congressional testimony in focus
* Dollar index off near-3-yr high
By Anirban Nag
LONDON, May 20 The yen lifted off 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 dollar fell 0.6 percent to 102.65 yen, having hit
a low of 102 in the Asian session. The euro lost 0.5 percent to
132 yen after plumbing 131.045. Last Friday, the
dollar reached a high of 103.32 yen, while the euro hovered near
a 3-1/2-year peak of 132.78 yen.
The yen's 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.
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
"Dollar/yen had overshot both from a technical (perspective)
as well as from the extreme short positioning that had seen
against the yen," said Alvin Tan, currency strategist at Societe
"But 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."
Tan said short-term momentum indicators such as the 14-day
relative strength index showed the dollar was overbought against
the yen and hence a pullback was due.
Data on Friday showed currency speculators increased bets in
favour of the dollar to their highest in 11 months in the week
ended May 14, while increasing bets against the yen.
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 programme may be slowed later this year as the U.S. labour
"We are dollar bulls and expecting more pieces of the puzzle
to fall into place - most notably serious speculation over the
normalisation of Fed policy, which can drive U.S. money market
rates and the dollar substantially higher," Chris Turner, head
of currency strategy at ING, wrote in a note.
Against a basket of currencies, the dollar took a
breather, trading 0.2 percent lower at 84.063. It hit a near
three-year high of 84.371 on Friday.
A soft dollar pushed the euro 0.2 percent higher to $1.2855
, off a 6-week low of $1.2796 hit on Friday. But further
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.