The dollar was lower against the yen on Monday as sharp declines in Asian equities overnight bolstered investor demand for the safe haven yen, but losses were held in check amid expectations for further reductions in stimulus by the Federal Reserve.

USD/JPY hit session lows of 104.15 and was last down 0.50% to 104.32, not far from the five year highs of 105.43 struck last Thursday.

The pair was likely to find support at 104.00 and resistance at 104.94, the session high.

Japan’s Nikkei dropped 2.5% on Monday after data over the weekend showed that activity in China’s services sector slumped to the weakest level since August 2011 in December, fuelling concerns over the outlook for growth in the world’s second largest economy.

Demand for the dollar continued to be underpinned after cautiously optimistic comments from outgoing Federal Reserve Chairman Ben Bernanke boosted the outlook for the U.S. economy.

Speaking Friday, Bernanke said the U.S. economy should continue to improve in 2014, but added that the recovery remains incomplete.

The euro touched fresh four week lows against the dollar, with EUR/USD dipping 0.02% to 1.3586, the weakest level since December 5.

Elsewhere, the euro fell to two week lows against the yen, with EUR/JPY down 0.53% to 141.71.

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