(Updates prices, adds comments; changes byline, dateline, previous LONDON)
* Dollar set for biggest loss vs euro in over 3 weeks
* U.S. ISM service employment falls for first time in 2 yrs
* Dollar slips on worry over Friday's U.S. Feb jobs report
* Dollar steady against yen
By Sam Forgione
NEW YORK, March 3 (Reuters) - The U.S. dollar was set to post its biggest one-day percentage decline against the euro in more than three weeks on Thursday after data showing a decline in U.S. service sector employment added to worries over Friday's monthly U.S. jobs data.
The euro gained more than 0.5 percent against the greenback to a session high of $1.0938, rebounding from a more than one-month low of $1.0823 Wednesday and putting the dollar on track for its biggest daily percentage loss against the euro since Feb. 9.
The Institute for Supply Management (ISM) said its employment index fell to 49.7 in February from 52.1 a month earlier, marking the first fall in service-sector employment since February 2014.
Traders had already bought euros and sold dollars ahead of the ISM data to brace for a potentially weaker-than-expected U.S. Feb. non-farm payrolls figure on Friday. Economists polled by Reuters expect U.S. employers to have added 190,000 jobs last month.
The data intensified concerns about the U.S. labor market and further dampened expectations that the Federal Reserve would hike interest rates any time soon, analysts said. Fed hikes are expected to boost the dollar by driving investment flows into the United States.
"The data this morning was weak enough to add a touch of concern to the market," said Jason Leinwand, managing director at Riverside Risk Advisors in New York. "The market is definitely leaning away more and more from the prospects of a Fed hike this year."
The dollar index, which measures the greenback against a basket of six major rivals, hit its lowest level in nearly a week, at 97.715.
While the euro added to gains against the dollar after the ISM data, it had already advanced to $1.0926 before the data was released. The dollar was giving back Wednesday's gains against the euro on uncertainty ahead of the non-farm payrolls figure, said Chris Gaffney, president of EverBank World Markets in St. Louis.
"It's squaring up positions going into the big number tomorrow, not wanting to be caught on the wrong side," Gaffney said.
The dollar held its ground against the yen and was last up 0.15 percent at 113.61 yen. The dollar was last down 0.47 percent against the Swiss franc at 0.9916 franc.
On Wall Street, the benchmark S&P 500 stock index was last down 0.12 percent.
(Additional reporting by Anirban Nag in London; Editing by Bernadette Baum)