* Dollar, yen drop after data buoy risk appetite
* U.S. manufacturing sector grew in October - ISM
* Pending home sales unexpectedly rose in September (Updates with U.S. data, adds quotes, updates prices)
By Wanfeng Zhou
NEW YORK, Nov 2 (Reuters) - The dollar and yen fell on Monday as improving economic data worldwide and rising stock prices eroded the greenback's safe-haven appeal.
A raft of U.S. data on manufacturing, construction and housing showed more evidence of a recovery in the world's largest economy, encouraging investors to buy riskier assets with higher yields.
Separate surveys showing China's manufacturing sector growing at its fastest pace in 18 months in October and expansion in euro zone factory activity also boosted market sentiment. See [ID:nSP62642]
"All the numbers show stabilization and the start of some expansion. That's a continuation of what we've been seeing for the past couple of months," said Thomas Nyheim, vice president and portfolio manager at Christiana Bank & Trust Co. in Greenville, Delaware.
The U.S. manufacturing sector has now grown for three consecutive months, the Institute for Supply Management said on Monday.
Other reports showed pending sales of previously owned U.S. homes rose in September to their highest in nearly three years, and construction spending posted its largest gain in a year in September. For details, see [ID:nWEN5869] [ID:nN02432431] [ID:nN30418368].
In mid-morning trading, the euro rose 0.8 percent to
$1.4841 after rising as high as $1.4845
The dollar gained 0.5 percent to 90.58 yen
The ICE Futures U.S. dollar index, a measure of the greenback's value against a basket of six major currencies, fell 0.5 percent to 75.941 <.DXY>. (Additional reporting by Ryan Vlastelica; Editing by W Simon )