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

* PMI surveys bring euro relief from sell off

* Gains seen temporary as Russian sanction risks weigh

* Drop in jobless claims buoys greenback versus yen

* NZ dollar tumbles after RBNZ sounds less hawkish

(Updates market action, changes dateline, previous LONDON)

NEW YORK, July 24 (Reuters) - The euro rose on Thursday from an eight-month low versus the U.S. dollar on better-than-expected German and French business data, while the New Zealand dollar sank after that nation's central bank hinted it may pause in 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 its lowest since early 2006.

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

More European Union sanctions are likely to weigh on a fragile recovery and stoked bets of even looser monetary policy from the European Central Bank. The ECB cut interest rates in June and has left the door open on further monetary loosening, a move 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 $1.3448 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 $1.3471, up 0.05 percent from Wednesday's U.S. close.

The euro gained 0.3 percent against the yen at 137.01 yen and rebounded 0.4 percent against the pound to 79.33 pence after hitting a 23-month low on Wednesday.

The dollar climbed 0.3 percent versus the yen at 101.75 yen, its strongest in about a week. Its gain was capped after a report showed U.S. new home sales posted its biggest one-month drop in nearly a year in June.

KIWI SKIDS

The biggest mover among developed 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, the country's biggest export earner.

The kiwi was on track to fall 1.3 percent for its biggest one-day drop versus the greenback in almost 11 months. It last traded at $0.8586, a level not seen since June 2012.

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