NEW YORK (Reuters) - The dollar and yen fell on Friday after a strong US housing report and upbeat comments from Federal Reserve Chairman Ben Bernanke reduced the safe-haven appeal of the US and Japanese currencies.

At an annual Fed conference in Jackson Hole, Wyoming, Bernanke gave his clearest signal yet that a recovery is at hand, although he warned that growth would be sluggish.

In addition, US existing-home sales rose in July for a fourth straight month, and the euro zone service sector and manufacturing showed gains in activity. That data bolstered optimism about the global economy and lifted the euro to a two-week high versus the dollar.

"We've hit a bottom in the housing market. I think you're going to see further dollar and yen declines on that outlook," said Fabian Eliasson, vice-president of currency sales at Mizuho Corporate Bank in New York.

"As conditions improve both here and in Europe...there's less need for safer-haven currencies as the yen and dollar have been in the past year. The market moves into riskier assets."

In afternoon trading in New York, the euro rose 0.6 percent at $1.4325, after hitting a session peak of $1.4375, the highest level since August 7, according to Reuters data. It was also up 0.7 percent at 135.19 yen.

"Both (Bernanke and housing data) were more bullish than what the market was looking for. The market is just taking those headlines as extreme positives for the outlook both in the US and globally," said Jacob Oubina, currency strategist, Forex.com Bedminster, New Jersey. "It's back to the whole risk-on trade."

The dollar was up 0.2 percent at 94.34 yen, near session highs, after trading as low as 93.4 yen earlier.

"After contracting sharply over the past year, economic activity appears to be leveling out, both in the United States and abroad, and the prospects for a return to growth in the near term appear good," Mr. Bernanke said.

"Although we have avoided the worst, difficult challenges still lie ahead."

Earlier in the session, a survey showed that the decline in the euro zone's services sector almost came to a halt in August while manufacturing activity contracted at a far slower pace than expected, lifting the euro to a one-month high against sterling.

Some analysts, however, warned it is too early to conclude that the euro zone economy is out of the woods, which could cap the euro's gains.

"Some of the positive data recently has not been evoking big reactions, and there are still a lot of risks around the corner," said Neil Mellor, currency strategist at Bank of New York Mellon.

The commodity-linked Australian and New Zealand dollars also rose as the price of oil hit its highest level of 2009, helping to revive investor risk appetite. Trading remained quiet, though, with many investors out for summer holidays.

The Australian dollar rose 0.2 percent to $0.8348 and the New Zealand dollar was up 0.7 percent to $0.6826 , helped by a more than one percent spike in US crude oil prices.