(Updates to U.S. afternoon)
    By Saqib Iqbal Ahmed
       NEW YORK, Jan 24 (Reuters) - The dollar edged lower
against the euro on Tuesday after data showed euro zone business
activity made a surprise return to modest growth in January,
while U.S. business activity shrank for a seventh straight
month.
    While U.S. business activity shrank in January, the downturn
moderated across both the manufacturing and services sectors for
the first time since September and business confidence
strengthened as the new year began.
    "It just looks like another piece of data showing what the
Fed has been preaching: the economy is resilient enough to take
on more hikes," said Juan Perez, director of trading at Monex
USA in Washington.
    Fed fund futures see only two more quarter-point rate hikes
by the Fed to a peak of around 5% by June, before it starts
cutting rates later in the year. The Federal Reserve itself has
insisted it still has 75 bps of increases in the pipeline.
    "It is clear looking at PMIs that the Fed has prevented
expansion, but the economy has not taken a hit like many
thought," Perez said.
    Still, the dollar, which briefly gained on the euro after
the U.S. data, slipped to trade lower on the day, not far from
the 9-month lows hit in the previous session. 
        The euro was 
    0.09
    % higher at $
    1.0881
    , just shy of the 9-month high of $
    1.0927
     touched on Monday.
  
    The common currency was backed by survey data supporting the
view that the euro zone economy was weathering a winter of
intense price pressures reasonably well, analysts said.
    Surveys showed euro zone business activity made a surprise
return to modest growth in January, and service-sector activity
in Germany expanded for the first time since June, although
price pressures remained sticky.
    A stronger economy could potentially allow the European
Central Bank to raise interest rates more aggressively as it
tackles inflation. 
    "But if earnings and other items put a negative light on the
globe, the euro is more quickly to suffer the consequences than
the buck," Monex USA's Perez said.
    The dollar rose to a near 1-week high against the yen,
before giving up those gains to trade down 0.44% to 130.095 yen.
    Last week, the dollar fell to as low as 127.215 yen, its
weakest since May, ahead of a Bank of Japan policy review at
which investors bet the central bank might signal the end of its
stimulus program. The BOJ, however, left policy unchanged,
giving the dollar some respite.
        Sterling  GBP=D3  was one of the worst-performing major
currencies against the dollar, falling 
    0.34
    % on the day to $
    1.2334
    , after a survey showed British private-sector economic
activity fell at its fastest rate in two years in January.
  
    "Looking forward, we expect sterling to start
underperforming neighboring European currencies as economic data
highlights widening growth differentials," said Simon Harvey,
head of FX Analysis at Monex Europe.
    Meanwhile, bitcoin  BTC=BTSP  was little changed on the day
at $22,973, steadying after having jumped by about a third in
value since early January, as investors shook off pessimism
after the high-profile collapse of crypto exchange FTX.
    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
World FX rates    https://tmsnrt.rs/2RBWI5E
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Additional reporting by Amanda Cooper in London; editing by
Jacqueline Wong, Simon Cameron-Moore, Christina Fincher, Andrea
Ricci and Mark Heinrich)
 ((saqib.ahmed@thomsonreuters.com; @SaqibReports; +1 332 219
1971; Reuters Messaging:
saqib.ahmed.thomsonreuters.com@reuters.net))