* 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 (Reuters) - 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 Japanese yields.
"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 Generale.
"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 market improves.
"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.