(Updates to U.S. afternoon)
    By Saqib Iqbal Ahmed
       NEW YORK, Jan 25 (Reuters) - The dollar slipped against
the euro on Wednesday, but its losses were capped as traders
were hesitant to make any big bets ahead of next week's central
bank meetings, including the Federal Reserve and the European
Central Bank. 
   In addition, much of Asia is observing Lunar New Year
holidays, leading most major currencies to cling to familiar
ranges.
    "Trading ranges remain remarkably compressed ahead of next
week's central bank meetings," said Karl Schamotta, chief market
strategist at Corpay.
    Traders broadly expect the Fed to increase rates by 25 basis
points (bps) next Wednesday, a step down from a 50 bps increase
in December. Meanwhile, the ECB has all but committed to raising
its key rate by half a percentage point next week.
    "With global demand conditions holding up, inflation
subsiding, and terminal rate expectations well below their
peaks, last year's big directional trades have given way to a
more nuanced landscape," Schamotta said.
    Lack of any big U.S. data releases on Wednesday contributed
to sluggish trading conditions.
    Still, with the U.S. Commerce Department set to release its
initial advance fourth-quarter gross domestic product estimates
on Thursday, there was potential for market moves picking up
later this week, Schamotta said.
    "Surprises are possible in the gross domestic product and
personal consumption numbers due tomorrow and the next day. If
the post-pandemic era has taught us anything, it’s that
'bullwhip effects' can have deeply unpredictable consequences
for the real economy," he said.
    The euro  EUR=EBS  was 0.23% higher at $1.0913, not far from
the nine-month high of $1.0927 touched on Monday. 
    Data on Tuesday showed euro zone business activity made a
surprise return to modest growth in January. Expectations of
further rate increases by the ECB have also supported the euro. 
    German business morale improved in January, according to Ifo
Institute survey data released Wednesday, as inflation eased and
the outlook brightened.
    In contrast, U.S. business activity contracted for the
seventh straight month in January, data showed on Tuesday,
though the downturn moderated across manufacturing and services
for the first time since September.
    The dollar was down 0.42% against the yen  JPY=EBS , at
129.615 yen per dollar, having hit a near eight-month low of
127.215 on Jan. 16.
    Elsewhere, the Australian dollar surged to a more than
five-month high on Wednesday after inflation data came in hotter
than expected, bolstering the case for further rate increases
from the Reserve Bank of Australia. 
    The Australian dollar  AUD=D3  was last up 0.76% to $0.7099.
    Meanwhile, the New Zealand dollar  NZD=D3  was down 0.44% to
$0.6479, after the country's annual inflation of 7.2% in the
fourth quarter came in below its central bank's 7.5% forecast.
    Sterling  GBP=D3  was 0.47% higher against the dollar in a
choppy session after data showed British manufacturers
unexpectedly lowered their prices in December, which suggested
inflation may be easing, ahead of next week's Bank of England
policy meeting.    
    The dollar rose 0.18% against its Canadian counterpart
 CAD=D3  after the Bank of Canada on Wednesday hiked its
benchmark overnight interest rate by 25 basis points to 4.5%,
its highest level in 15 years, and said it would likely pause to
measure the cumulative effect of previous increases.
     Meanwhile, bitcoin  BTC=BTSP  was little changed on the day
at $22,757, continuing to tread water after having jumped by
about a third in value since early January, following steep
losses after the high-profile collapse of the FTX crypto
exchange.
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World FX rates    https://tmsnrt.rs/2RBWI5E
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 (Reporting by Saqib Iqbal Ahmed; editing by Sharon Singleton
and Jonathan Oatis)
 ((saqib.ahmed@thomsonreuters.com; @SaqibReports; +1 332 219
1971; Reuters Messaging:
saqib.ahmed.thomsonreuters.com@reuters.net))