* UAE emergency support seen stabilizing Dubai situation
* Dubai World plans to restructure units, euro rises
* Dollar/yen November fall biggest monthly drop this year
* Business activity in U.S. Midwest stronger than expected (Updates prices, adds comment)
By Gertrude Chavez-Dreyfuss
NEW YORK, Nov 30 (Reuters) - The dollar fell broadly on Monday after a pledge to support Dubai's banks eased investors' concerns about the Arab emirate's debt problems, wiping out a safety bid for the greenback and driving it down against a currency basket for a fifth straight month.
The U.S. currency's decline began in Asia as equities advanced on a pledge by the central bank of the United Arab Emirates to provide emergency support to Dubai's banks. Dubai's oil-rich neighbor, Abu Dhabi, also offered to provide selective support to Dubai companies. For details, see [ID:nGEE5AS0AH].
The euro pushed even higher versus the dollar after a late rally in stocks, driven by news that Dubai World plans to restructure units including developer Nakheel NAKHD.UL, in a move covering $26 billion in debt. For details, click on [ID:nN30462350].
That story on Dubai World's restructuring fed a rally in stocks and the euro followed suit, said Jacob Oubina, senior currency strategist, at Forex.com in Bedminster, New Jersey.
The fact that Dubai World is doing something is positive for risk appetite, and that prompted a rally in risk trades.
Dollar selling may also have something to do with month-end flows related to foreign portfolios, said John McCarthy, director of foreign exchange at ING Capital Markets in New York.
Since the U.S. stock market rallied in November -- the S&P 500 posted gains of 5.7 percent this month -- and boosted foreign funds' dollar holdings, managers needed to sell dollars to maintain hedge ratios at the end of the month.
If not for the month-end flows, we would see the dollar much higher. What the Dubai news has confirmed is that the world (economy) is not as robust as the equity markets would like us to think, McCarthy said.
In late afternoon trading, the ICE Futures U.S. dollar index .DXY, a gauge of the greenback's performance against six other major currencies, was down 0.3 percent on the day at 74.798. The index touched a 15-month low of 74.170 last week.
The euro rose 0.3 percent to $1.5010, but was off last week's 15-month peak just above $1.5140.
ROBUST MIDWEST ACTIVITY
A report showing business activity in the U.S. Midwest expanded more strongly than expected in November had also lifted the euro earlier. [ID:nN27340123]
Major currencies, however, stayed in narrow ranges as U.S. stocks fell in choppy trading during most of the day and investors worried that markets will remain volatile until year-end.
For the month, the dollar index fell 2 percent, dropping for five consecutive months. The last time the dollar index posted five straight monthly declines was in the second half of 2004, according to Reuters data.
The greenback also fell 4.1 percent against the yen, its worst monthly performance since the end of 2008.
The yen held steady after hitting a 14-year high at 84.81 yen last week, according to Reuters data. The dollar last traded little changed at 86.40 yen, while the euro was up 0.2 percent at 129.47 yen EURJPY=R.
A Japanese official on Monday said the government would try to stem the currency's rise, although he did not cite any specific measures.
In light of the Dubai shock, we want to respond more aggressively than originally planned with an extra budget, Japan's strategy minister, Naoto Kan, who is also deputy prime minister, told reporters. We also want to stop the yen's rise and cooperate with the BOJ. [ID:nT77759]
Those remarks, however, did not deter investors from buying the yen. Most analysts believe Japanese authorities will not intervene in the market to slow the yen's gains given that the rise in the currency is more a reflection of the dollar's weakness than yen strength.
In addition, the positive flow of Japanese data -- from the manufacturing sector, in particular -- increasingly supports the view that exports are far more sensitive to overseas demand than the currency level, says Mizuho in a research note. (Additional reporting by Wanfeng Zhou; Editing by Leslie Adler) ((email@example.com; +1-646-223-6322; Reuters Messaging: firstname.lastname@example.org))