LONDON, Jan 26: The dollar weakened against the euro and steadied against the yen Thursday on the eve of key US growth data expected to provide clues about the future direction of interest rates in the United States.

The euro climbed to $1.2251 in European trading from $1.2238 in New York late on Wednesday.

The dollar stood at 115.83 yen from 115.82 on Wednesday.

Market players were hesitant to make bold moves ahead of US fourth-quarter GDP numbers due Friday, dealers said.

As market participants are not ruling out the possibility that the US GDP ... may provide dollar-supportive evidence, they prefer to wait for the outcome, Chuo Mitsui Trust and Banking foreign exchange manager Yasuhisa Ishida said.

Dollar watchers were also awaiting US durable goods orders for December, expected on Thursday.

There is a risk today (Thursday) of euro/dollar trading weaker and of a test of the resistance area around $1.2200/ 1.2170, particularly if the US data is better than expected, said Commerzbank currency strategist Gavin Friend.

The US unit remained weaker against the European single currency on growing expectations that the gap in interest rates will close between the United States and the eurozone after a survey on German business sentiment on Wednesday.

The Fed, which has raised its key Fed funds rate by a quarter-point on 13 consecutive occasions to 4.25 per cent, is expected to lift borrowing costs at least twice more in the coming months before pausing.

The euro was changing hands at 1.2251 dollars against 1.2238 late on Wednesday, 141.93 yen (141.76), 0.6858 pounds (0.6861) and 1.5489 Swiss francs (1.5477).

The dollar stood at 115.83 yen (115.82) and 1.2639 Swiss francs (1.2645).

The pound was being traded at $1.7864 (1.7833).—AFP