* Economy minister suggests yen has weakened enough
* BOJ meeting, Bernanke's congressional testimony in focus
NEW YORK May 20 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
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
"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
"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.