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FOREX-Euro firms on upbeat business data, NZ dollar sags

* Euro steadies on PMI data after hitting 8-month low vs dlr

* More Russian sanctions may renew pressure on euro

* Drop in jobless claims buoys greenback versus yen

* NZ dollar tumbles after central bank sounds less hawkish (Updates market action)

By Richard Leong

NEW YORK, July 24 (Reuters) - The euro held above an eight-month low versus the U.S. dollar on Thursday after the release of stronger-than-expected German and French business data, while the New Zealand dollar sank after that nation's central bank hinted it may pause before raising rates further.

The greenback traded narrowly mixed against most major currencies as it reached a one-week high against the yen following data that showed weekly U.S. filings for first-time jobless benefits fell to the lowest since early 2006.

Private reports showed business activity in Germany and France strengthened in July and June, respectively, but the risks to the euro zone economy from any tougher sanctions on Russia limited gains in the common currency.

Any targeting of Russian banks by the European Union or any other sanctions would likely weigh on a fragile recovery, stoking bets of an even looser policy from the European Central Bank. The ECB cut interest rates in June and has left the door open to further monetary loosening, which would hurt the euro.

The latest euro zone business data are "a marginal positive, but I don't think the ECB will change its view on a modest recovery," said Brian Dangerfield, currency strategist at RBS Securities in Stamford, Connecticut.

The euro fell to an eight-month low of $1.3438 in early European trading on the EBS trading system before rebounding to a session high of $1.34855 after the euro zone "flash" composite survey was released, showing the index at a three-month high in July. The single currency was last $1.3463, little changed from Wednesday's U.S. close.

The euro gained 0.3 percent against the yen to 137.08 yen and rebounded 0.4 percent against the pound to 79.28 pence after hitting a 23-month low on Wednesday.

The dollar climbed 0.3 percent versus the yen to 101.82 yen, its strongest in about a week. Its gain was capped after a report showed U.S. new home sales posted the biggest one-month drop in nearly a year in June.


The biggest mover among developed country currencies was the New Zealand dollar. It slumped to a six-week low after the Reserve Bank of New Zealand (RBNZ) shifted to a wait-and-see stance and Governor Graeme Wheeler warned against a strong currency. Still the RBNZ raised its policy rate by 25 basis points to 3.5 percent.

Some traders have questioned the need for more tightening in the face of a strong currency, restrained inflation and falling prices for dairy products, the country's biggest export earner.

The kiwi was on track to fall 1.45 percent for its biggest one-day drop versus the greenback in more than a year. It last traded at $0.8575, a level not seen since June 2012.

(Additional reporting by Anirban Nag in London, Shinichi Saoshiro in Tokyo; Editing by Catherine Evans, Ruth Pitchford, Bernadette Baum and Peter Galloway)