(Recasts with reaction to U.S. data, updates prices, adds comment; changes dateline, previous LONDON)

By Nick Olivari

NEW YORK, May 24 (Reuters) - The dollar slipped against the euro and yen on Tuesday as investors awaited minutes from the Federal Reserve's last meeting for hints on the pace of future U.S. interest rate hikes.

Investors will scrutinize the minutes of the Fed's May 3 meeting -- when it raised rates to 3 percent -- to see how central bank policy-makers view slowing industrial activity and their outlook on inflation.

Expectations of growing interest rate differentials between the United States and the euro zone, where sluggish domestic demand threatens the growth outlook, have boosted the dollar by nearly 7 percent against the euro this year.

Further dollar gains will depend on the number and size of future rate increases. The minutes are scheduled for release at 2 p.m. EDT (1800 GMT).

"We're in a holding pattern ahead of the Fed minutes," said Omer Esiner, market analyst at Ruesch International in Washington, D.C.

The euro rose 0.1 percent to $1.2593 in midmorning trade. Against the yen, the dollar was 0.1 percent lower at 107.54 .

Muting gains in the single currency was a German ZEW research institute monthly survey showing investor confidence fell sharply in May to its lowest level in six months.

"The number was a huge undershoot compared with what was expected," said Shahab Jalinoos, senior currency strategist at ABN AMRO in London. "It's put the focus back on the deteriorating economic situation in the euro zone."