TOKYO (AFX-ASIA) - The dollar was off its lows against the yen in midafternoon trade, bolstered by talks of large option-linked buy orders around the 133 yen level, dealers said. However, the sustained rally in the local equity market capped the US currency's rebound, they said. North Pacific Bank foreign exchange manager Toshikazu Shimamura said the dollar is expected to remain exposed to the downside risk in the near-term, as foreign investors are scrambling to cover short positions on Japanese equities following the introduction of a tighter short-selling rule. "In addition, continued capital repatriation is still capping the top-side of the dollar, although the volume itself has already peaked out," he said. The uncertainty over the US capital markets despite the release of positive economic data may also weigh on the top-side of the dollar, dealers said. "Because of the uncertainty over the prospects of the US markets due to the underlying accounting worries there, offshore investors appear not to be in the mood to reinvest in the US markets," he said. The Commerce Department said overnight that the US economy expanded by 1.4 pct in the fourth quarter, a faster pace than the previous estimate of a 0.2 pct growth rate. "However, the main scenario is that the dollar/yen will continue to stay in the 132-135 yen trading range," Shimamura said. He said the dollar, if it fails to hold onto the 131.50 yen level -- where sizeable option-linked buy orders are said to be lined up -- may fall to below the 130 yen level. The euro was rangebound against the dollar due to concerns over the prospects of the economic performance in the euro-zone, together with a lack of market confidence in the currency, dealers said. "People are still hesitant to buy into the euro by force due to a lack of confidence in this currency, with all excitement already having faded," Shimamura said. "It seems to take some time before they can regain any strong confidence in this currency," he added.