* UAE emergency support seen stabilizing Dubai situation
* Yen steady despite comments from Japanese officials
* Dollar/yen on pace for biggest monthly fall this year
* Business activity in U.S. Midwest stronger than expected
(Updates prices, adds comment, changes byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Nov 30 (Reuters) - The dollar slipped against the
euro on Monday as easing concerns about Dubai's debt problems
and an upbeat U.S. regional business activity report diminished
the greenback's safe-haven allure.
The U.S. currency decline began in Asia as equities
advanced on a pledge by the central bank of the United Arab
Emirates to provide emergency support to the region's banks.
Dubai's oil-rich neighbor, Abu Dhabi, also offered to provide
selective support to Dubai companies. For details, see
[]
Investors remained cautious, however, and the yen rose as a
top Dubai finance official said the government will not
guarantee Dubai World's debt and said creditors are responsible
for their actions. []
"Even though the dollar is down, risk has been definitely
taken off the table," said John McCarthy, director of foreign
exchange at ING Capital Markets in New York, citing weakness in
stocks.
Dollar selling may also have something to do with month-end
flows related to foreign portfolios, he added.
Since the U.S. stock market rallied in November -- the S&P
500 is on track to post gains of 5 percent this month -- and
boosted foreign funds' dollar holdings, managers needed to sell
dollars to maintain hedge ratios at the end of the month.
"If not for the month-end flows, we would see the dollar
much higher. What the Dubai news has confirmed is that the
world (economy) is not as robust as the equity markets would
like us to think," McCarthy said.
In early afternoon trading, the ICE Futures U.S. dollar
index <.DXY>, a gauge of the greenback's performance against
six other major currencies, was down 0.2 percent on the day at
74.860. The index touched a 15-month low of 74.170 last week.
The euro rose 0.2 percent to $1.5001 <EUR=>, pulling back
from last week's 15-month peak just above $1.5140.
ROBUST MIDWEST ACTIVITY
A report showing business activity in the U.S. Midwest
expanded more strongly than expected in November briefly lifted
the euro above $1.5020. []
Major currencies, however, stayed in narrow ranges as U.S.
stocks fell in choppy trading and investors worried that
markets will remain volatile until year-end.
"We will have a lot of window dressing as the year winds
down and investors and fund managers tend to shy away from
riskier assets and currencies," said Shaun Osborne, chief
currency strategist at TD Securities in Toronto.
For the month, the euro gained about 1.9 percent against
the dollar. The greenback fell 4.3 percent against the yen, its
worst monthly performance since the end of 2008.
The yen held steady after hitting a 14-year high at 84.81
yen last week, according to Reuters data. The dollar last
traded down 0.2 percent at 86.25 yen <JPY=>, while the euro
dipped 0.1 percent to 129.38 yen <EURJPY=R>.
A Japanese official on Monday said the government would try
to stem the currency's rise, although he did not cite any
specific measures.
"In light of the Dubai shock, we want to respond more
aggressively than originally planned with an extra budget,"
Japan's Strategy Minister Naoto Kan, who is also deputy prime
minister, told reporters. "We also want to stop the yen's rise
and cooperate with the BOJ." []
Those remarks, however, did not deter investors from buying
the yen. Most analysts believe Japanese authorities will not
intervene in the market to slow the yen's gains given that the
rise in the currency is more a reflection of the dollar's
weakness than yen strength.
In addition, the positive flow of Japanese data -- from the
manufacturing sector, in particular -- increasingly supports
the view that exports are far more sensitive to overseas demand
conditions than currency level, according to a research note
from Mizuho.
((Additional reporting by Wanfeng Zhou; Editing by Gary
Crosse))
((gertrude.chavez@thomsonreuters.com; +1-646-223-6322; Reuters
Messaging: gertrude.chavez.reuters.com@reuters.net))
((Multimedia versions of Reuters Top News are now available
for: * 3000 Xtra: visit http://topnews.session.rservices.com
* BridgeStation: view story .134
For more information on Top News: http://topnews.reuters.com))
