* UK manufacturing PMI data due at 0828 GMT * May give signal on UK economic performance in Q3 * Spain worries also put pound under pressure vs dollar * Euro recovers from 3-week low hit last week LONDON, Oct 1 (Reuters) - Sterling hit its lowest in two and a half weeks against the dollar on Monday as caution set in before a UK manufacturing survey and concerns about Spain made investors wary of buying riskier currencies. Investors will use the purchasing managers' survey on manufacturing, due at 0828 GMT, along with a services PMI survey later this week, to gauge whether the UK economy emerged from recession in the third quarter. Sterling was down 0.15 percent at $1.6139, having earlier hit $1.6109, just below its 21-day moving average at $1.6115. "Sterling is going to struggle to make too much in the way of gains against the dollar in the current environment, as markets are still going to be relatively risk averse in the short term," said Jeremy Stretch, head of currency strategy at CIBC. Uncertainty continued over when Spain may ask for an international bailout while investors awaited a review on Spain by Moody's rating agency, which could see Spanish debt downgraded to junk status. The UK PMI data is expected to show that manufacturing activity contracted further last month, with the PMI index seen falling to 49.0 from 49.5 in August. This would leave it still below the 50 level that separates growth in activity from a contraction and a weak number could weigh on the pound. However, other recent data out of the UK has been more positive and the outlook is less bleak than that of the euro zone. "Sterling should do relatively well against the euro in the short term, but it does need a bit of UK impetus and obviously the two PMI indices on manufacturing today and services on Wednesday will be integral to that," CIBC's Stretch said. The euro was last up 0.2 percent at 79.66 pence, recovering after last week's falls which took it to a three-week low of 79.23 pence. However, the single currency was expected to remain broadly weak until Spain applies for aid. A Spanish bailout request would be seen as a positive for the euro and for riskier currencies, including sterling, because it would allow the European Central Bank to start buying the country's bonds, lowering its borrowing costs. An external audit of the capital needs of Spain's ailing banks, released on Friday, showed a shortfall marginally below market expectations but it failed to assuage concerns about the country's funding issues.

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