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TOKYO, Oct 5 (Reuters) The euro slipped against the yen and the dollar on Thursday as investors took profits before a widely expected interest-rate increase by the European Central Bank later in the session.

The ECB is seen raising rates to 3.25 percent, and investors are keenly awaiting comments from ECB President Jean-Claude Trichet for whether he uses the word ''vigilance'' to signal more credit tightening is on the way.

Currencies have mostly been confined to tight ranges in the past few months, keeping some market players on the sidelines as they await a return to more sustained volatility.

The dollar has held up in the past few weeks even as an array of soft economic data has stoked expectations the Federal Reserve's next move will be to cut rates next year after keeping them steady for the past few months at 5.25 percent.

Fed officials have said in speeches this week that they are still worried about inflation staying too high even as the economy cools from a sharp slowdown in the housing market.

Fed Vice Chairman Donald Kohn said late on Wednesday that he would be very concerned if inflation were to rise from current levels.

''Kohn didn't really move the market. He wasn't really hawkish and he wasn't really dovish. He just explained the situation,'' said a chief dealer at a European investment bank in Tokyo.

''No one really expects a hike or lowering of rates in this coming month,'' he said.

The yen has suffered the most of major currencies as investors keep dumping the low-yielding currency for higher-yielding counterparts, partly in carry trades.

The dollar slipped to 117.65 yen from 117.90 yen in late New York trade, down from a 5-1/2-month high of 118.39 yen struck earlier in the week.

The euro fell 0.2 percent to 149.50 yen and has had trouble sustaining gains above 150 yen after approaching the all-time high of 150.73 yen struck in late August.

The single European currency also edged down to $1.2700 but has been confined roughly between $1.26 and $1.29 over the past three months.

The lack of big market swings in euro/dollar has driven gauges of implied volatility -- or how much the options market expects a currency to move over a given time -- to all-time lows since the single currency was launched in 1999.

The Bank of England wraps up a two-day policy meeting and is also seen keeping rates steady at 4.75 percent, with its decision due at 1100 GMT. The ECB decision is at 1145 GMT, with Trichet's usual post-meeting news conference slated for 1230 GMT.

Investors will also keep an eye out for comments from Bank of Japan Deputy Governor Toshiro Muto, who is due to deliver a speech and take questions later in the day, for any clues on when the central bank could next raise rates.

''People are focusing on Muto, because it's been a while since he's made a public appearance and there's a chance he could be hawkish about rates,'' said Takashi Kido, forex manager at Sumitomo Trust and Banking.

A rise in the quarterly tankan survey of business sentiment to a two-year high in September has bolstered expectations for the BOJ to lift rates to 0.5 percent from 0.25 percent in the first quarter next year.

Reuters SBA VP0745