* UAE emergency support seen stabilizing, caution remains
* Business activity in U.S. Midwest stronger than expected
* Yen stays firm despite comments from Japanese officials
* Dollar/yen on pace for biggest monthly fall this year (Updates prices, adds comment, detail)
By Wanfeng Zhou
NEW YORK, Nov 30 (Reuters) - The U.S. dollar fell against the euro on Monday as easing concerns about Dubai's debt problems and stronger-than-expected U.S. regional business activity data eroded safe-haven demand for the greenback.
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. For details, see [ID:nSP362937].
The dollar's decline began earlier in the global session as Asian equities advanced on the UAE central bank's pledge to provide emergency support to the region's banks and as Dubai's oil-rich neighbor, Abu Dhabi, offered to provide selective support to Dubai companies. See [ID:nGEE5AS0AH]
"It's a return to risk scenario, really more than anything," said Andrew Busch, global currency and public policy strategist at BMO Capital Markets in Chicago. "The markets are taking comfort from the words out of Abu Dhabi and UAE on providing liquidity and supporting banks."
A report showing business activity in the U.S. Midwest expanded more strongly than expected in November also briefly lifted shares on Wall Street and weighed on the greenback. [ID:nN27340123].
In midday 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 74.888. The index touched a 15-month low of 74.170 last week.
The euro rose 0.2 percent to $1.4987
Major currencies stayed in tight ranges as U.S. stocks fell in choppy trading and investors worried that markets will remain volatile until the 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 versus the dollar. The greenback fell 4.4 percent against the yen, the worst monthly performance since the end of 2008.
JAPAN SPEAKS UP
The Japanese yen stayed firm after hitting a 14-year high
of 84.81 yen last week, according to Reuters data. The dollar
last traded down 0.3 percent at 86.12 yen
A Japanese official said the government would try to stem the currency's rise, although he did not specify any measures.
"In light of the Dubai shock, we want to respond more aggressively than originally planned with an extra budget," 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." [ID:nT77759]
Finance Minister Hirohisa Fujii denied a report that he would not intervene in currency markets, saying he had never said intervention was impossible. [ID:nT308559] Separately, Bank of Japan Governor Masaaki Shirakawa said currency volatility was undesirable. [ID:nTKZ006320]
"We expect the yen to remain in demand although recent government comments reveal an increasing degree of nervousness," currency strategists at BNP Paribas wrote in a research note. The firm expects dollar/yen to trade in a range of 85 to 88 as risk aversion continues.
The Australian dollar was up 0.8 percent at $0.9136
Later in the week, investors will focus on the European Central Bank's decision on its one-year funding operation. It is expected to keep rates steady on Thursday.
A U.S. jobs report on Friday will also be closely watched.
The Canadian dollar