TOKYO (AFX-ASIA) - The dollar was lower in midafternoon trade, hit by worries over continued violence in the Middle East, dealers said. The decline in the US currency gained further momentum after Prime Minister Ariel Sharon said Israel is ready to fight the Palestinians to the finish after 13 Israeli soldiers were killed in an ambush in a West Bank refugee camp. Shinsei Bank foreign exchange manager Masanori Hirabayashi said investors are now nervously waiting for the outcome of the peace mission of US Secretary of State Colin Powell. "It is too premature to judge that the dollar has already hit the bottom of the latest downturn, and the unit, depending on developments in the Middle East, may be pushed to close to around 128 yen level," he said. "If this level is broken, the dollar may extend its falls towards the 125 yen level -- this means that all accumulated positions for 'Japan selling' will effectively evaporate," he said. Renewed worries over the outcome of the forthcoming reporting season in the US also continued to pressure the dollar, dealers said. "Some investors are now beginning to revise their view on the prospects for the US economy, due to reduced expectations for strong recovery of the US economy and corporate earnings," Hirabayashi said. The dollar saw some support on the downside given concerns about action by the Japanese authority, dealers said. However, Finance Ministry director-general Zenbei Mizoguchi said this morning that the government maintains the view a stable dollar/yen is desirable in the mid-term, though in the short-term it will fluctuate due to diverse factors. The euro was firmer against the dollar, drawing interest as a safe-haven after Saudi Arabia said it will ensure that oil-consuming nations have enough supply to make up for losses caused by a 30-day export halt from Iraq, dealers said. "The euro may be paving (the way) for a test of the upper-0.88 usd level," Hirabayashi said.