* UK services sector sees fastest slowdown in a decade * Speculation the BoE considering more QE intensifies * Euro underperforms as investors shun risk By Nia Williams LONDON, Sept 5 (Reuters) - Sterling hit a 1-1/2 month low against the dollar on Monday after data showed a sharp slowdown in the UK services sector, fuelling speculation the Bank of England may resort to another round of asset purchasing to boost the economy. The pound fell to a session low of $1.6095 , its lowest level since July 20, before bouncing back to last trade at $1.6142, down 0.5 percent on the day. Traders said the market had positioned for weak data and cited buying by an Asian central bank at around $1.6100. Market players said sterling would remain under pressure after a UK services purchasing managers' index fell to 51.1 in August from 55.4 in July. It was the biggest fall in more than a decade and much worse than forecasts for a drop to 54.0. The data added to an already gloomy picture of slowing global growth, heightened by data on Friday showing no U.S. jobs growth in August. That weighed on demand for perceived higher risk currencies such as sterling, and boosted investor appetite for the more liquid dollar. "We had already seen quite a significant move to the downside in cable before the numbers and the weakness in the services PMI is giving further ammunition to the sterling bears against risk-off currencies like the dollar," said Audrey Childe-Freeman, strategist at JP Morgan Private Bank. A recent run of lacklustre UK economic data has fuelled speculation the Bank of England (BoE) may consider further quantitative easing, which would be negative for the pound as it would flood the market with the UK currency and could cripple demand. Analysts at Goldman Sachs said in a note they thought the BoE was most likely to engage in a second round of quantitative easing, dubbed QE2, in November and purchase around 100 billion pounds in assets. The BoE Monetary Policy Committee is expected to keep interest rates at record lows until 2013 due to the UK's poor growth prospects. . Policymakers will announce their latest rate decision on Thursday and are also likely to discuss the case for QE2, although minutes of the meeting will not be published until later this month. "There has been much more talk of potential QE and although I don't think anybody will expect the BoE to do anything this week, these numbers will leave market participants in sterling pretty nervous," said Childe-Freeman. EURO UNDERPERFORMS Investors were also reluctant to hold the euro, which is hampered by worries the euro zone sovereign debt crisis could spiral out of policymakers' control. In the latest development to unnerve investors, Greece and its international lenders are now at odds over whether Athens has met conditions for a new aid tranche. The euro was last down 0.2 percent versus the pound at 87.47 pence , with some support seen at around 87.42 pence, the 61.8 percent retracement of its Aug. 19-31 climb. It briefly rose to a session high of 87.95 pence on the UK PMI numbers but reversed those gains shortly afterwards. "In this environment sterling doesn't do great against the dollar or the yen but holds its own against the euro which has bigger problems," said Paul Robson, currency strategist at RBS. "But given the contagion channels between the UK and the euro zone in terms of trade and the financial systems it is hard to say any negative news for the euro is good for sterling." (Editing by Susan Fenton)

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