* Yen gives ground as charts suggest rally overdone
* UAE c.bank action seen providing stability, but minimal
* Japan finmin says no intervention for now - report
* But he also notes he never said intervention was impossible
By Satomi Noguchi
TOKYO, Nov 30 (Reuters) - The dollar fell against other major currencies on Monday, retreating from sharp gains made last week, after the United Arab Emirates offered emergency assistance to banks in Dubai, soothing market fears about a looming debt default.
The dollar pared some losses after one of two flagship firms behind Dubai's rapid growth, Nakheel, said it had asked for three listed Islamic bonds to be suspended from the Nasdaq Dubai until it could inform the market fully about the outlook for the bonds.
The yen also edged up amid market uncertainty about how to react.
But the day's direction for the dollar was still down as investors pared safety trades taken out late last week on nervousness about Dubai, with Asian stock markets climbing and recouping some of last week's sell off.
The yen slipped early as hedge funds sold it to cover short positions in yen crosses, and as charts suggested the Japanese currency's steep gains last week that took it to a 14-year peak versus the dollar had run their course for now.
"The market has been whipped around by news on the Dubai fallout," said a senior proprietary trader for a Japanese bank.
The dollar index, a gauge of the greenback's performance against six other major currencies, fell 0.6 percent from late U.S. trade on Friday to 74.533, after climbing as much as 1 percent that day and above a 15-month low of 74.170 last week.
The euro rose 0.4 percent to $1.5055. It trimmed its gains on the yen to stand just 0.2 percent up at 129.80 yen, although it was above a seven-month low of 126.95 yen touched on Friday on trading platform EBS.
The Australian dollar climbed about 1.2 percent to $0.9170.
The U.S. dollar, however, fell 0.4 percent to 86.18 yen as the Japanese currency edged up later, although the greenback was still above a 14-year low of 84.82 yen hit on Friday on EBS.
On the charts, the relative strength index showed the pair had moved into oversold territory, signalling dollar selling might be losing a bit of momentum for now, and dollar demand from Japanese importers at month-end helped it early in the session.
Concerns about Dubai last week sparked unwinding of carry trades, with investors rushing to buy back the low-yielding dollar and yen which they had used to buy higher-yielding currencies and assets such as the Aussie.
The UAE's central bank set up an emergency facility on Sunday to support bank liquidity in the first policy response to Dubai's debt woes that threatened to paralyse lending and derail the global economic recovery.
But analysts said the UAE efforts were considered the minimum policy help and this would likely limit the impact.
"The (UAE central bank's) move offers stability to the market, but it also reflects the seriousness of the problem," said Masafumi Yamamoto, chief FX strategist for Japan at Barclays Capital.
"Given the great amount of uncertainty over how the rescue will be conducted and the impact on financial firms, the market continues to be nervous about the Dubai developments."
JAPAN TO INTERVENE?
After the dollar's drop to the 14-year low last week, when market sources said Japanese authorities had been checking rates in the market, dealers are trying to gauge if Japan will become concerned enough to step in to sell yen, as it did earlier in the decade.
Finance Minister Hirohisa Fujii was quoted by the Mainichi daily as saying he would not intervene in currency markets and that now was a time to monitor markets.
Fujii later commented, however, that he had never said intervention was impossible.
Fujii late last week raised the prospect of a Group of Seven joint statement on currencies to cool the yen's rally, but with no sign of coordinated intervention market players grew increasingly sceptical over whether the yen's rise was disorderly enough to draw a response from the U.S. or Europe.
They said however the chance of unilateral action, if not joint intervention, may be growing, with more signs Tokyo was taking the yen's sharp gains as a serious issue that could deepen deflationary pressure on the economy.
The head of the Bank of Japan, Masaaki Shirakawa, said the bank would act decisively if financial markets destabilised again, his strongest hint yet at fresh steps to support markets.
Shirakawa's comment came ahead of an expected meeting with Prime Minister Yukio Hatoyama this week, and a government official said he expected one topic would be whether the BOJ is considering the need for quantitative easing.
The Japanese government is also expected this week to include measures to help ease the impact of the yen's rise on the economy in an extra stimulus budget. (Editing by Joseph Radford) ((satomi.noguchi@thomsonreuters.com; +81-3-6441-1875; Reuters Messaging; satomi.noguchi.reuters.com@reuters.net))