* Yen regains ground vs dollar on minister's comments
* Japan's Amari warns of negative impact of weak yen
* Euro/Swiss franc rises to fresh 13-month high
By Anooja Debnath
LONDON, Jan 15 (Reuters) - The yen rebounded from a 2-1/2-year low against the dollar on Tuesday, as investors took profit on bets against the Japanese currency after a minister warned of the potential disadvantages of excessive yen weakness.
Some said the fall in the dollar would be temporary, however, with investors expected to buy the U.S. currency back given widespread expectations of aggressive monetary easing by the Bank of Japan.
The dollar was down 1.2 percent on the day at 88.40 yen, hurt by comments from Japanese Economics Minister Akira Amari who said excessive yen weakness could hurt people by raising import prices.
Traders cited support at 88.20 yen, the dollar's 200-hour moving average, while reported stop loss sell-orders at 89.50 yen could cap any recovery in the U.S. currency. Traders also cited option barriers at 90 yen.
"While this move was triggered by (the minister's) comments, there are lots of people out there who believe the yen is over-extended and so this pull-back isn't that surprising," said Jane Foley, senior currency strategist at Rabobank.
"We now have to see if the pull-back continues or if people are looking at this as an opportunity to get even shorter yen."
The dollar's setback came a day after it hit 89.67 yen, its highest since June 2010.
Bets on aggressive monetary easing from the Bank of Japan have weighed heavily on the yen in recent months. The central bank has been under relentless pressure from newly elected Prime Minister Shinzo Abe to adopt a 2 percent inflation target to beat deflation once and for all.
It holds its next policy meeting on Jan. 21-22.
The yen's rise pushed the euro down 1.7 percent on the day to 117.85 yen after Amari's comments. The euro had struck a 20-month peak of 120.13 on Monday.
Despite its fall against the yen, the euro extended gains against the Swiss franc, rising to a fresh 13-month high. The euro rose to 1.23865 francs on trading platform EBS, its highest level since December 2011.
The Swiss franc has come under selling pressure as concerns about the euro zone debt crisis have receded, prompting investors who had bought the Swiss currency as a refuge from the euro's problems to cut long positions.
Euro/Swiss franc implied volatilities, or demand to hedge against sharp currency swings, have risen sharply. The one-month vols have risen to 6.1 percent from around 2 percent before the European Central Bank interest rate decision last Thursday.
"The euro/Swiss franc is a dormant currency and not many were positioned for this spike higher. As a result, implied volatilities have exploded," said a chief options trader at an European bank. He said there was demand for topside option strikes - bets for the euro to rise to 1.25 francs - but that level was likely to cap the euro rally.
The euro fell against the dollar as some Asian central banks booked profits on its latest rally. It last traded at $1.3330 , down 0.4 percent on the day and off Monday's near 11-month of $1.3404.
Greater confidence in the euro zone and receding expectations of a rate cut in the near term have helped the euro outperform many of its peers in recent sessions. It was trading near a 9-1/2 month high against the British pound, with sterling increasingly vulnerable to concerns about a fragile UK economy.