TOKYO (AFX-ASIA) - The dollar was higher against the yen in thin midafternoon trade, benefiting from dollar short covering, dealers said. However, they said there was an undercurrent of nervousness in the foreign exchange market today due to concerns over possible terrorist attacks in the US to coincide with Independence Day celebrations. Akihiro Yuuki, dealing section manager at Japan's regional Chiba Bank, said the recent position adjustments to cover short dollar positions will not last long, adding the US currency is likely to soon encounter fresh selling pressure. "US firms will soon announce (second-quarter) earnings. I think the dollar will react negatively to weak earnings news in the US," Yuuki said, adding he expects the dollar will continue to trade weaker against other major currencies for the time being. "It is still uncertain whether accounting scandals in the US have ended (after WorldCom)," he added. Yuuki said the dollar's downside is, however, well-supported as investors continue to worry about possible intervention by Japanese authorities. "... If the dollar falls below the 118.30 level against the yen, (it is highly likely that) the US currency will see a very sharp fall (past that level). I think Japanese authorities know that level is very important and they will make every effort to support the dollar at that level," he said. He sees the dollar/yen moving within the 118.30-120.80 range in the coming week. The euro was little changed against other major currencies ahead of the European Central Bank governing council meeting, although no fresh leads are expected to emerge from that meeting, dealers said. Yuuki said he expects the euro will soon rebound following recent euro-long position adjustments, adding that he expects the euro/dollar to move within the 0.9600-1.0000 usd range in the coming week. "I think the euro will fall to around the 0.9600 level on position adjustments," he said. After that, the euro will rebound again to test parity with the dollar, he said, predicting that the parity level would be reached, possibly within this month.