* Euro hits 2-week high vs dlr after strong EZ PMIs
* German services, French manufacturing sectors expand
* Yen hits 1-mth high vs dlr
By Naomi Tajitsu
LONDON, Aug 21 (Reuters) - The euro hit a two-week high against the dollar and a one-month high versus sterling on Friday as strong readings of euro zone purchasing managers' surveys added to the view the region's economy is improving.
A rise in oil prices to their highest level of the year also helped to boost risk appetite and helped high-yielding currencies including the Australian and New Zealand dollars to recover from early losses.
An initial reading of the euro zone composite PMI jumped by three points to 50.0 in August, the precise point that divides contraction and growth, and came in far higher than most economists' forecasts.
The data pushed European equities to a 9 1/2-month high and some analysts said it suggested that the euro zone economy may not be as far behind the United States as many in the market had believed.
"Much of the thesis of those looking for a stronger dollar has been that the U.S. recovery would outperform the euro zone recovery," said Ray Farris, currency strategist at Credit Suisse in London.
"But the data so far has not been giving the impression that the U.S. is generating a positive growth differential with the rest of the world."
He added: "The data delivery shows that the euro area is recovering smack in line with the U.S. and it makes it extremely difficult to argue that you should have a significant divergence in interest rate spreads."
The euro zone readings followed unexpected rises in German and French PMIs, which also boosted the single European currency .
By 1140 GMT, the euro traded 0.6 percent higher at $1.4335, after touching $1.4343 for the first time since Aug. 7 in earlier trade. It was 0.2 percent higher at 134.44 yen, having recovered from the day's low of 132.92 yen.
The single currency also rallied to 86.78 pence, its strongest against sterling since late July.
RECOVERY DOUBTS REMAIN
U.S. crude oil prices rose more than 1.5 percent to around $74 per barrel, its highest of 2009. This pushed the Australian and New Zealand dollars both up around half a percent against the dollar, while recouping early losses versus the yen.
The euro's gains against the dollar pushed the U.S. currency lower across the board. It fell 0.4 percent against the yen to 93.84 yen, having hit a one-month low of around 93.47 on electronic trading platform EBS.
German services PMI rose as high as 54.1, confounding forecasts for a much smaller improvement to 48.7 and taking the index well above the 50 level that marks expansion in the sector. French manufacturing PMI also rose above 50 to 50.2.
Markets cheered the figures on Friday, but some analysts warned it is too early to conclude that the euro zone economy is out of the woods just yet, which may cap the euro's gains.
"Some of the positive data recently has not been evoking big reactions and there are still a lot of risks around the corner," said Neil Mellor, currency strategist at Bank of New York Mellon. (Additional reporting by Jessica Mortimer, editing by Patrick Graham)