SINGAPORE, Dec. 2 (MNI) - The U.S. dollar continued with a mixed tone through the Asian afternoon Wednesday, holding near morning highs against the yen as weakening risk aversion kept yen crosses afloat while continuing to trade sideways versus the euro.

Dealers said much of the fears about the fallout from Dubai's planned debt repayment delays appear to have faded into the background for now, giving way to fresh bouts of risk-taking activities, although caution persisted over the threat of Japanese intervention to curb the yen's gains.

This morning in Asia, dollar-yen made another attempt to mount Y87.00, highs seen as the Dubai news broke last week. The pair managed to hit a Y87.16 high in late morning trade, supported by demand for yen crosses which began before the Tokyo fix this morning, according to dealers.

The post-fix activity carried euro-yen up through Y131.30 for an eventual high of Y131.56, as better risk appetite boosted stocks and commodity prices.

In Japan, the Nikkei 225 index closed up 0.38% at 9,608.94 while China's Shanghai Composite Index ended up 1.06% at 3269.75.

In other markets, spot gold jumped to another new record high this morning, at $1210.35 an ounce and then continued to trade near $1200 through the day.

Despite that, dollar-yen continued to march higher through the morning, clearing some of the rumored sell orders at Y87.10/20 with a clear break above seen as needed to carry the pair up towards another layer of offers and stops near Y87.50.

In late Asian trade, dollar-yen continued to probe above the morning high, around Y87.20 despite the improved risk sentiment, which has in the past led to unwinding in safe haven dollar positions.

"Given the prospect that the BOJ may eventually do more, and that the government may enlist the MOF to intervene, the yen should start to under-perform," commented RBS strategist Greg Gibbs.

"It is also likely to retain a negative correlation with risk appetite. However, the U.S. dollar is still in a broad downtrend, and it is not clear yet that Japanese policy makers are willing to take back the role of preferred funding currency."

Euro-dollar meanwhile, found itself trapped in a tight trading range since morning, mostly under $1.5100 despite an overnight spike to $1.5118 in New York.

Dealers said likely offers above $1.5120 and option-related orders above the recent high of $1.5145, at $1.5150 were sufficient to spook euro bulls from taking the pair higher this morning.

Euro-dollar then spent the remainder of the trading session between $1.5074 and $1.5100, save for a brief jump to $1.5104 earlier, not very far from where it had ended in New York, around $1.5080.

This came after Eurogroup President Jean-Claude Juncker said late yesterday that the euro-zone currency is "overvalued" compared to the Chinese yuan and "some adjustment is needed."

While solid offers were expected ahead of $1.5145, the 2009 peak seen last week, market players were prepared to see further gains to $1.5200 or $1.5250 in coming sessions.

"Talk alone is unlikely to deter U.S. dollar bears from pushing euro higher," said DBS Bank analysts. "Euro is still considered the best amongst the G3 currencies with the highest policy interest rate."

A Market News International ECB sources story published Tuesday said while the run-up in the euro over $1.5000 has prompted some concern for the ECB Council, there is no sign of panic.

"I don't think Europeans are relaxed about the euro's level," said one of the officials. "There are more talks going on than before, with U.S. and China. Trichet has raised the issue in public."

Ahead, event risk is starting to build up in the coming days with the European Central Bank meeting on Thursday, where ECB President Jean-Claude Trichet is likely to be queried on Juncker's comments overnight.

U.S. non-farm payrolls data are then due on Friday and the median estimate in a Market News International survey of economists looks for November payrolls to decline by 100,000. Estimates range from -160,000 to -75,000.

The unemployment rate is seen unchanged at 10.2%, with estimates ranging from 10.0% to 10.4%.

iahmad@marketnews.com ** Market News International Singapore Newsroom: 65-6559 6144 **