TOKYO (AFX-ASIA) - The dollar was top-heavy against the yen in midafternoon trading, reflecting concerns over spreading biowarfare attacks, dealers said. Such fears grew stronger following news that two Washington postal workers who died over the weekend were exposed to anthrax, and that a New Jersey postal worker is also suspected to have inhaled it. However, the stable performance of US capital markets and receding concerns over the depth of earnings problems surrounding the US high-tech firms are supporting the downside of the US currency, dealers said. In addition, the dollar is seeing strong downside support thanks to continued demand for short-covering mainly by speculators and US hedge funds, which built large short positions on the currency following the Sept 11 terrorist attacks, they said. Toyo Trust and Banking customer dealer Issaku Taguchi said the dollar may re-test the 123 yen level once again sooner rather than later as position-adjustment by speculators and hedge funds continues. "Such moves are also boosting interbank dealers' demand to buy the dollar more aggressively," he said. "But it seems to be too premature to conclude that the dollar has entered a rising trend from the mid- to long-term viewpoint, given the downside risk to its economic activity," In this regard, the dollar is expected to test the strength of bullish sentiment towards the currency in the next week, when a number of major US economic data will be released, including non-farm payroll data, dealers said. "Forthcoming US data may encourage investors to refocus on negative economic developments in the US," Taguchi said. "If so, the dollar may not be able to extend its rally towards 124-125 yen level." The euro was holding onto the 0.89 usd level thanks to modest short-covering after having fallen to this psychological level overnight in overseas markets, dealers said. Activity in the euro was subdued ahead of the central council meeting of the European Central Bank, dealers said. "If the ECB leaves interest rates unchanged, the euro is most likely to be pushed lower once again to below the 0.89 usd level and may test the 0.88 usd level," Taguchi said.