TOKYO (AFX-ASIA) - The dollar was higher in midmorning as domestic equities declined following the Bank of Japan's September Tankan survey of business sentiment but with overall currency trading subdued, dealers said. The headline large manufacturers' diffusion index of the Tankan survey came in below expectations although other numbers were in line. They added that concerns over earnings, particularly at the banks, ahead of the upcoming interim results season put pressure on equities and the yen, while fears over imminent retaliatory attacks by the US on Afghanistan have subsided. Investors are cautious ahead of tomorrow's Federal Reserve policy setting meeting, with trade also quiet due to today's public holiday in Hong Kong. "The result of the Tankan was mainly within expectations but the stockmarket's weaker," Commerzbank foreign exchange manager Ryohei Muramatsu said. Muramatsu noted concerns over Japanese earnings ahead of the interim results season and with banks saying they plan to take additional charges to dispose of bad-loans but added that the market is quiet ahead of the Fed meeting tomorrow. "Tomorrow is the FOMC meeting and it's a question of whether they cut 50 basis points or 25," Muramatsu said, adding that he expects the former. "October (forwards) show 50 basis points is discounted, while December nearly 70 points," he said. Muramatsu said the dollar is caught between strong resistance at 120.05 yen and support at 118.65 although reduced anxiety over the military situation in Central Asia has helped the dollar. "The American attack on Afghanistan is not imminent. One week ago the market was nervous about an attack," he said, adding at the same time that some form of assault could already be underway for all the market knows. In the Tankan survey, the large manufacturers' diffusion index (DI) came in at minus 33, compared with market forecasts of minus 24 to minus 31 and the BoJ's forecast of minus 14, made in the last survey in June. The large non-manufacturers' DI came in at minus 17, compared with market forecasts of minus 15 to minus 20 and the BoJ's minus 11. In the June survey, the large manufacturers' diffusion index came in at minus 16, while non-manufacturers was minus 13. The forecast for December in the latest survey for large manufacturers is minus 31 and for non-manufacturers minus 20. The September small manufacturers DI came in at minus 47, compared with forecasts' of minus 43 to 54 and the BoJ's minus 39. The small non-manufacturers DI came in at minus 37, compared with forecasts of minus 36 to minus 43 and the BoJ's minus 35.