* Dollar nurses losses after slump in U.S. ISM manufacturing
* Euro above $1.06 but investors wary ahead of ECB meeting
* Aussie refreshes 7-week highs after shining GDP data
By Lisa Twaronite and Ian Chua
TOKYO/SYDNEY, Dec 2 (Reuters) - The U.S. dollar edged back toward multi-month highs on Wednesday, taking back some ground lost when bulls got cold feet after data showed U.S. manufacturing contracted in November for the first time in three years.
The dollar index .DXY inched up about 0.1 percent to 99.894, after skidding below an 8-1/2-month high of 100.310 set on Monday - a high within a few ticks of its 12-year peak of 100.390 set in March.
The index, which tracks the U.S. unit against a basket of rival currencies, rallied 3.3 percent last month on expectations that the Federal Reserve is gearing up to hike U.S. interest rates at its Dec. 15-16 policy review.
But on Tuesday, the closely watched ISM survey prompted investors to trim some of their bullish dollar positions. The national factory index fell to 48.6 as the sector buckled under the weight of a strong greenback and deep spending cuts by energy firms.
Investors awaited the key nonfarm payrolls report on Friday, which is expected to show that employers added 200,000 jobs in November, according to economists polled by Reuters. A solid report would cement expectations that the Fed is on track to increase interest rates this month.
Against the yen, the dollar inched up to 123.03 yen JPY= moving back toward Monday's high of 123.34. It has been mired in consolidation mode against its Japanese peer since hitting a three-month high of 123.77 in mid-November.
"Japanese importers have demand for dollars, so any good figure, then 124, here we come," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.
Tempering dollar sentiment, Chicago Fed President Charles Evans emphasized the need for the U.S. central bank to spell out a gradual pace of rate hikes, and reminded investors not to forget the timing of future increases.
"We have been cautious about extending USD long positions ahead of the Fed, wary that the USD could give back ground if the Fed stresses caution and FX headwinds in their press conference," analysts at BNP Paribas (PA:BNPP) wrote in a note to clients.
The embattled euro edged down 0.1 percent to $1.0617 EUR= , with Monday's 7-1/2-month trough of $1.0557 in sight ahead of the European Central Bank's policy review on Thursday, at which investors widely expect the bank to unveil fresh stimulus measures.
Among the best performers on Tuesday were the Australian and New Zealand dollars. Both Antipodean currencies rallied more than 1 percent against their U.S. counterpart overnight.
With momentum already on its side, as well as the Reserve Bank of Australia's decision to skip a chance on Tuesday to cut interest rates or talk down the currency afresh, the Aussie was further aided by data showing the economy grew 0.9 percent in the third quarter. That reinforced views that interest rates will not be cut in the near term.
The Australian dollar climbed as far as a seven-week high of $0.7345 early in the session, having surged a full cent on Tuesday. It was last at $0.7315, having risen 1.6 percent in three sessions.
The kiwi came just shy of 67 U.S. cents NZD=D4 on Tuesday, its highest since early November, buoyed by rising global dairy prices. It was last down about 0.2 percent at $0.6662.
In contrast, investors dumped the Canadian dollar after the country's economic activity in September fell by a worse-than-expected 0.5 percent, driven by the decline in the oil and gas industry after a temporary production disruption.
The loonie fell to a 1-1/2-week low of C$1.3398 per USD, but recovered a bit to stand at $1.3370 in Asian trade. (Editing by James Dalgleish & Shri Navaratnam)