* Euro slips vs dollar, traders book profits on rally
* Investors await FOMC minutes for clues into rate outlook
* Euro sentiment struggles as Greece fiscal worries simmer
By Naomi Tajitsu
LONDON, Feb 17 (Reuters) - The euro slipped against the dollar on Wednesday as traders booked profits from a short-covering rally in the single European currency following big gains made the previous day.
Market participants also awaited minutes from the Federal Reserve's January policy meeting to be released later in the day, looking for insight into the U.S. central bank's exit strategy from loose monetary policy.
Having posted its biggest one-day percentage gain versus the dollar since July on Tuesday, the euro could not extend gains as concerns about Greece's fiscal problems simmered despite a lack of fresh details on how Athens would repair its debt position.
"The view that the worst-case scenario in Greece is unlikely to unfold has put a floor under the euro, and that has put a squeeze on some long dollar positions," said Daragh Maher, senior currency strategist at Credit Agricole CIB in London.
"Still, at the end of the day, the mood on the euro isn't fantastic, No one thinks the Greece situation has gone away."
Concern about Greece has knocked the euro down nearly 10 percent against the dollar since December and last week raised net euro short positions to a record high as worry over how Athens will service its debts cranked up risk aversion.
European finance ministers took a tough stance on Tuesday, telling Greece it may need to take further steps to bring its swollen debts under control. [ID:nLDE61F0XT]
By 1056 GMT, the euro <EUR=> had slipped 0.2 percent on the day to $1.3740.
In early European trade, it had climbed to around $1.3690, its highest since Feb. 11, boosted in part by a 1 percent rise in European shares <.FTEU3> as risk aversion eased.
"Another pullback in the euro is still a possibility because there's still a huge amount of euro shorts in the market," said Ulrich Leuchtmann, currency analyst at Commerzbank in Frankfurt.
The euro rose 0.3 percent to 124.43 yen <EURJPY=R>.
The dollar index <.DXY> inched up slightly on the day to 79.780, recovering from a slide to 79.559, its lowest since Feb. 4. Against the yen <JPY=> it rose half a percent to 90.56 yen.
Sterling <GBP=D4> slipped 0.1 percent to $1.5765, coming under selling pressure after figures showed an unexpected jump in UK unemployment claimants. [ID:nLDE61G0VB]
Minutes from the Bank of England's policy meeting earlier this month showed a unanimous decision not to increase its asset-buying programme in February, although some analysts said this did not rule out more stimulus in the future.
Later in the day, the Fed will release the minutes from its Jan. 26-27 meeting, when policy makers maintained a pledge to hold interest rates near zero. [ID:nN16236616]
But a dissenting note from Kansas City Federal Reserve Bank President Thomas Hoenig has sparked talk that monetary tightening could be approaching.
Some analysts said the dollar may gain if the minutes instil confidence the Fed is nearing a position where it could absorb excess liquidity in the market, the first step towards monetary tightening.
Fed Chairman Ben Bernanke last week offered details on how the central bank will begin to wean the economy off its extraordinary monetary stimulus.
At the same time, other analysts argued that an optimistic view of the economy in the minutes may increase risk appetite and weigh on the dollar, particularly given that the Fed has stuck to its pledge to keep interest rates near zero for "an extended period". (Editing by Nigel Stephenson)