* Euro stays near 2-year high versus weak dollar
* Pares gains after below-forecast euro zone PMI data
* But outlook still bright due to bearish dollar sentiment
* Dollar weak on expected Fed taper delay, lower US yields
By Jessica Mortimer
LONDON, Oct 24 (Reuters) - The euro rose on Thursday, trading near a two-year high against a weaker dollar as concerns about the outlook for the U.S. economy and monetary policy outweighed weaker euro zone data.
The dollar remained under pressure due to lower U.S. bond yields and expectations that the U.S. Federal Reserve will maintain its stimulus programme into next year.
The euro was up 0.2 percent at $1.3802, having earlier hit $1.3824, its strongest since November 2011.
It came off its highs after purchasing managers' surveys for the euro zone showed the pace of growth in business activity eased unexpectedly this month, suggesting the region's recovery may be less solid than previously thought.
Analysts and traders said the euro may struggle to make a sustained break above $1.38. However, it could get a boost if U.S. weekly jobless claims numbers at 1230 GMT are on the low side, following below-forecast non-farm payrolls on Tuesday.
"I think the euro has legs and strength and will trade through $1.40 up to $1.4250," said Neil Jones, head of hedge fund FX sales at Mizuho. He expected a gradual climb to $1.40 roughly over the next six weeks.
He said this was partly a "bearish dollar trade", based on expectations the Fed would not scale back its bond buying programme until at least March. He saw the euro as the main beneficiary from investors seeking alternatives to the dollar.
"The positive sentiment towards the euro is there and for that reason the market is tending to ignore poor euro zone data and trade on good data."
Jane Foley senior currency strategist at Rabobank, however, said Thursday's peak of $1.3824 could act as stiff chart resistance for the euro for now.
"The disappointing tone of the euro zone data will suggest that the euro is looking toppy up here, and this should keep euro/dollar in check," said Jane Foley senior currency strategist at Rabobank.
The dollar fell broadly, hitting a near nine-month low against a basket of currencies of 79.081. It was last down 0.1 percent on the day at 79.168.
Weak U.S. jobs data on Tuesday suggested the U.S. recovery was not yet on a firm footing, while a drop in the 10-year U.S. Treasury yield on Wednesday to a three-month low further dented the dollar's appeal.
The dollar dipped 0.1 percent against the yen to 97.30 yen but held above Wednesday's two-week low of 97.15 yen.
The Australian dollar was down 0.1 percent at $0.9614, paring gains after an earlier boost from data showing Chinese manufacturing activity hit a seven-month high in October.
Analysts said concerns remained about rising money market rates in China, which may weigh on the Australian currency. China's benchmark seven-day repo rate rose nearly a full percentage point on Thursday after China's central bank let cash flow out of the money market for a second week.