* Risk aversion moves keep yen well-bid
* Dollar near highs vs euro, sterling before Fed meeting
* Activity subdued in Asia amid Lunar New Year holidays
By Rika Otsuka
TOKYO, Jan 26 (Reuters) - The yen rose on Monday, crawling towards a record high against sterling and a seven-year peak against the euro, as fears about the global recession and banking sector problems prompted investors to shun risk.
The dollar stayed not far from a 23-year high against sterling and a six-week high versus the euro both reached late last week, when dismal British and euro zone data led investors to shift money from European currencies to the greenback. But activity was subdued in Asia as many financial markets were closed for the Lunar New year, while Australian markets were shut for a national holiday. Thin volume made price moves choppy.
"Investors are wanting to pull their funds out from every asset with risks," said Tsutomu Soma, senior manager of foreign securities at Okasan Securities. "It's getting to the point that investors sell assets even in G7 countries that used to be considered as very safe."
The dollar dipped to 88.63 yen, down 0.1 percent from late U.S. trading on Friday. Last week the U.S. currency fell as low as 87.10 yen, the lowest since July 1995.
The euro fell 0.6 percent to 114.29 yen, not far from the seven-year trough of 112.08 yen also hit last week.
Sterling dropped 1.3 percent to 120.70 yen, remaining within striking distance of a record low of 118.80 yen hit on Friday.
The euro fell on Friday after data showed the British economy entered a recession at the end of last year for the first time since 1991, contracting at its fastest pace in nearly 30 years.
The dollar stayed buoyant against many currencies other than the yen as investors looked for moves from the White House to revive banks and draw up a plan to help the world's biggest economy out of a year-long recession.
Investors also awaited the Federal Reserve's two-day policy setting meeting starting on Tuesday.
The euro slid 0.6 percent to $1.2896. The European single currency sank to a six-week trough of $1.2764 on Friday, with investors taking little encouragement from surveys showing the euro zone manufacturing and services sectors contracted at a slightly slower pace in January.
Sterling fell 1.3 percent versus the dollar to $1.3623 after hitting a 23-year trough of $1.3500 on Friday.
The pound has tumbled recently on worries about a weak economy as well as concerns over the stumbling British banking sector and the parlous state of government finances. (Editing by Michael Watson)