* Euro recovers slightly after hitting 9-month low vs dollar
* Dollar index hits fresh 11-month peak
* Kiwi dented by fall in dairy prices, mixed NZ jobs data
By Jemima Kelly
LONDON, Aug 6 (Reuters) - The euro recovered a touch after sliding to a nine-month low against the dollar on Wednesday, hit by a sharp drop in German industrial orders and uncertainty about the intentions of Russian troops operating near the Ukrainian border.
The dollar hovered just under an 11-month high against a basket of major currencies that it had hit earlier in the day, boosted by upbeat U.S. data as well as a move by investors away from currencies perceived as higher-risk plays.
The single European currency dropped after data showed German industrial orders falling at their steepest rate in almost three years in June.
That appeared to have been partly the result of companies being more cautious about taking on contracts amid escalating geopolitical tensions, as well as lower euro zone demand.
Polish Prime Minister Donald Tusk said on Wednesday that he had reasons to suspect that the threat of a direct intervention by Russia’s military in Ukraine has risen over the last couple of days. [ID:nW8N0PY006}
“Germany is very heavily linked to Russia on a trade basis, so given the trade sanctions that are now being put in place, Germany is going to be one of the countries that is hardest hit by that,” said Ian Stannard, head of European currency strategy at Morgan Stanley in London.
“If we’re in a position where activity data was softening already, and that’s likely to be hit further by sanctions, that’s going to leave the euro in quite a vulnerable position from here.”
The euro fell to as low as $1.3349, its weakest since November. It last stood at $1.3370, flat on the day.
The dollar index surged to a peak of 81.637, its highest since early September.
Helping to support the greenback, data on Tuesday showed that the U.S. services sector activity hit an 8-1/2 year high last month and factory orders surged in June, bolstering expectations of solid economic growth in the third quarter.
“We’re back into the medium-term trend, which is for a higher dollar,” said Jesper Bargmann, head of trading for Nordea Bank in Singapore.
Over time the euro is likely to head lower versus the dollar, due to a divergence in the outlook for monetary policies of the United States and the euro zone, he said.
In addition to the European Central Bank’s policy meeting on Thursday, traders will be focused on forthcoming U.S. economic data and whether they come in strong enough to push forward market expectations for the timing of a Federal Reserve rate hike, Bargmann added.
The dollar held steady versus the safe-haven yen near 102.51 .
The New Zealand dollar skidded to a two-month low after milk prices fell again at an auction held by Fonterra Co-operative Group, the world’s biggest dairy exporter.
It extended its decline on data showing a moderation in jobs growth at home, an outcome that some suspect could buy the central bank more time to stay on the sidelines following four successive interest rate hikes this year.
The latest retreat in equities and risk sentiment also dented the New Zealand dollar, said Hamish Pepper, a currency strategist for Barclays in Singapore.
“It’s a confluence of factors, all negative for the kiwi dollar at the moment,” Pepper said, adding that a focal point is whether support for the kiwi at its early June trough near $0.84 would hold.
The kiwi dropped 0.2 percent to $0.8449, having fallen as far as $0.8423, its lowest level in two months. (Additional reporting by Masayuki Kitano in Singapore and Ian Chua in Sydney; Editing by Toby Chopra)