* Euro hits 2-week high vs dlr after euro zone data
* German services, French manufacturing sectors expand
* Reports of possible tighter Chinese bank lending rules
(Updates prices, adds comment, changes byline, dateline, previous LONDON)
By Steven C. Johnson
NEW YORK, Aug 21 (Reuters) - The euro hit a two-week high against the dollar on Friday as data showed a decline in the euro zone's dominant services sector almost came to a halt, sparking hope that the region's economy is improving.
The commodity-linked Australian and New Zealand dollars also rose as the price of oil hit its highest level of 2009, helping to revive investor risk appetite. Trading remained quiet, though, with many investors out for summer holidays.
Analysts said the market was looking ahead to U.S. existing home sales data and a speech from Federal Reserve Chairman Ben Bernanke on lessons of the financial crisis, both due at 10 a.m. (1400 GMT).
A jump in euro zone service sector and manufacturing activity that pushed the composite PMI index to 50, the dividing line between contraction and growth, also lifted the euro to a one-month high against sterling and sent European stocks to a 9-1/2-month high.
"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, FX strategist at Credit Suisse in London.
But he said the data "shows 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 was last up 0.6 percent at $1.4333 after hitting $1.4343, its highest level since Aug. 7. It was flat at 134.28 yen but hit a one-month high against sterling at 86.79 pence.
The dollar slipped to a fresh one-month low against the yen and was last down 0.5 percent at 93.70 yen. Sterling added 0.3 percent to $1.6556 and the New Zealand dollar rose 1.1 percent to $0.6832, helped by a 1.5 percent spike in U.S. crude oil prices.
Some traders said positive sentiment was dulled a bit by reports that China's banking regulator, concerned about a rise in bad loans, may tighten banks' capital rules.
RECOVERY DOUBTS REMAIN
The euro zone readings followed unexpected rises in German and French purchasing managers' indexes, which also boosted the single European currency.
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, 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.
But if stock markets start to advance again and data starts pointing to stronger growth, currency investors positioned for a pullback are likely to be wrong-footed, strategists at Brown Brothers Harriman said in a research note.
"It is important for investors to be aware of what the consensus is and what the market is prepared for," they wrote.