The US dollar rebounded against the yen in midday trade here on buying by Japanese importers following the US unit's slide overnight, dealers said. Overnight, the dollar fell to below the 116-yen level for the first time in two weeks as strong Japanese corporate capital expenditure data prompted some heavy unloading of short yen positions on crosses and on dollar/yen trade. A government survey released yesterday showed capital spending by Japanese companies leapt by 16.6 pct year-on-year between April and June, the highest rate in the survey's history, suggesting that Japan's economy may be performing better than recent weak data have indicated. Despite its modest uptick this morning, the dollar appears exposed to downside risk in the short-term, with some market participants still opting to unload short yen positions, dealers said. "The market as a whole still needs to adjust their historically-large short positions on the dollar, unless fresh negative leads on the yen emerge," Athena FX director Takashi Kudo said. The market is also eagerly waiting Friday's speech by Bank of Japan governor Toshihiko Fukui to assess the scope of downside support for the dollar, dealers said. "The market wants to see what Fukui has to say on the recent mixed bag of economic data and on the outlook for interest rates," Kudo said. Meanwhile, the euro rebounded against the yen after hitting a six-day low overnight on active profit-taking, but its near- term outlook remains volatile due to huge short yen positions outstanding, dealers said. "Depending on the strength of ongoing position adjustments, the euro may be sold to test the 147 yen level," Kudo said.