TOKYO (AFX-ASIA) - The dollar turned top-heavy against the yen in midafternoon trading, hit by profit-taking following a sharp rebound in the past few days, dealers said. The US currency briefly touched 121.00 yen earlier thanks to the rebound on Wall Street overnight following the widely expected 50 basis point rate cut in the US. Aozora Bank foreign exchange deputy manager Kazuhiro Nishina said that although underlying sentiment appears to have turned in favor of the dollar, the currency will continue to see strong top-side resistance. "The market has already priced in the initial shock following the Sept 11 terrorist attacks, but underlying downside risks for the US economy have not gone away," he said. "As long as such risks are out there, people will find it difficult to chase the dollar back towards the 122 yen level -- the level which was seen prior to the incident." Nishina played down the significance of further narrowing in interest rate differentials between Japan and the US, adding that "as long as there are gaps in nominal rates, players will not try to engage in dollar-carry trade". The dollar's strong upward momentum was also tempered by uncertainty over the prospect of military action by the US and its allies in response to the Sept 11 terrorist attacks, dealers said. The euro advanced further against the dollar and the yen thanks to wider interest rate spreads between the Eurozone countries, the US and Japan, dealers said. "Buying of the euro as a defensive currency will continue, as international investors see difficulties in finding alternative currencies for investment," Nishina said. "In particular, the euro looks to be attractive against the yen." Dealers said the next upside target for the euro is at the 0.950 usd level and the 113.50 yen level.