* Yen jumps on report Japanese govt may be happy with current level
* Other major currencies subdued ahead of key events this week
* BOJ meeting, Bernanke's Congressional testimony in focus
By Ian Chua
SYDNEY, May 20 (Reuters) - The yen bounced off a 4-1/2 year low against the dollar early in Asia on Monday in the wake of reports suggesting the Japanese government might be happy with the level of the currency following its extended decline.
The dollar last traded at 102.87, having slid about 1 percent from late New York levels to a low of 102.00. The euro plumbed 131.05 from 132.45 late in New York, before steadying at 131.95.
Just last Friday, the dollar reached a 4-1/2 year high of 103.32, while the euro hovered near a 3-1/2 year peak of 132.78.
The turnaround came after Japan's economy minister, Akira Amari, was reported by the Wall Street Journal as saying the yen's excessive strength has largely corrected and further weakness in the currency could be harmful.
That sparked some short covering in a very thin market that exaggerated the yen's bounce.
"It was on the back of those Amari comments ... especially after the big rally in dollar/yen on Friday. But thin liquidity is exacerbating the moves," said Sue Trinh, senior currency strategist at RBC in Hong Kong.
Traders said further declines in dollar/yen will depend on the outcome of the Bank of Japan (BOJ) May 21-22 policy meeting as well as Federal Reserve Chairman Ben Bernanke's Congressional testimony later in the week.
The BOJ is expected to hold off on easing policy further, but may fine-tune its market operations to stem recent volatility in the bond market.
Last month, the BOJ unleashed the world's most intense burst of stimulus, promising to inject $1.4 trillion into the economy in less than two years to meet its pledge of achieving 2 percent inflation in roughly two years.
The euro was little changed against the dollar, buying $1.2831, remaining near a one-month low of $1.2796 reached on Friday.
The Australian dollar was also steadier at $0.9740, but it too stayed near an 11-month trough of $0.9711 set on Friday.
Talk the Federal Reserve might dial down its massive stimulus programme later this year on the back of some upbeat economic data had supported the greenback in the past few weeks.
Indeed, data out on Friday showed currency speculators had increased their bets in favour of the U.S. dollar to the highest in 11 months in the week ended May 14.
Dollar bulls, however, will be keeping a close eye on Bernanke's testimony given that he has showed no signs of wanting to taper the Fed's bond-buying, or Quantitative Easing (QE), programme any time soon.
"We expect Bernanke to reiterate the Fed's commitment to accommodative policy stance, while sticking to the latest policy statement in terms of cost and benefit of further QE, that it is prepared to increase or decrease the size of purchases as the economy evolves," analysts at Barclays Capital wrote in a client note.