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* Euro falls after German Ifo survey highlights weak economy

* European PMI readings adds to sluggish growth view

* Dollar supported on sliding oil price

By Naomi Tajitsu

LONDON, July 24 (Reuters) - The euro fell to a two-week low against the dollar on Thursday after a slew of weak European economic data highlighted slowing growth and cooled expectations of more interest rate rises.

The Munich-based Ifo economic research institute said its index of German corporate sentiment dropped to 97.5 from a revised 101.2 in June. This was much weaker than expectations for a reading of 100.0 and took the index to its lowest level since September 2005 [nL24784441].

This pushed the euro <EUR=> down 0.3 percent to $1.5638, its weakest level since early July. The Ifo figures followed data showing falls in manufacturing and service sector activity in France, Germany and the wider euro zone.

Analysts said the data spurred the view that the European Central Bank may be cautious about following up an interest rate rise earlier in the month with more monetary tightening, which could weigh on the euro.
"It's a horrible number," said Michael Klawitter, currency strategist at Dresdner Kleinwort in Frankfurt, referring to the Ifo figure. "Clearly this is a number which the ECB cannot ignore any longer. It will certainly have an impact on the rhetoric of the August ECB meeting."

He added: "It's confirming the view that the situation for euro/dollar is deteriorating in the medium term."

The RBS/Markit Eurozone Purchasing Managers Index for services companies fell to a five-year low of 48.3 in July from 49.1 in June, while manufacturing activity slumped to 47.5 from 49.2, showing that activity continue to contract [nL24103778].

At the same time, Germany's manufacturing sector put in its weakest performance in nearly three years in July as new orders fell [nL23100322], while activity in France's services sector fell at its fastest rate in over a decade [nL23278533]

DOLLAR SUPPORTED

The dollar hovered near a one-month high against the yen on Thursday, supported by a slide in oil prices and hawkish comments by a Fed official earlier in the week.

The U.S. currency <JPY=> rose as high as 107.98 yen, around its highest level in a month, before pulling back slightly to 107.80 yen by 0823 GMT, down slightly on the day.

"It's still very much a dollar-buying game," said Divyang Shah, chief strategist at Commonwealth Bank of Australia.
He added that the U.S. currency continued to draw support from a fall in oil prices from record highs, as well as comments from Philadelphia Fed President Charles Plosser earlier this week that U.S. rates may have to rise sooner rather than later to combat inflation.

U.S. crude oil CLc1 fell to $123.62 per barrel on Thursday, its lowest level since early June and further retreating from a record high $147.27 hit earlier in the month.

The New Zealand dollar <NZD=D4> was down 0.4 percent at $0.7411, near a six-month low around $0.7404 hit earlier after the country's central bank cut interest rates for the first time in five years.

The Reserve Bank of New Zealand cut its cash rate by a quarter percentage point to 8 percent and said further reductions were likely to counter a rapidly slowing economy. [ID:nWEL287981]

Data on existing U.S. home sales are due later in the day. Some in the market said weak readings could draw attention back to the sluggish housing market, which may put the dollar under selling pressure. (Reporting by Naomi Tajitsu and Toni Vorobyova, Editing by Malcolm Whittaker)

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