* Euro extends gains vs dollar after ISM data
* Dollar rises against Japanese yen (Adds comments, updates prices)
By Vivianne Rodrigues
NEW YORK, Aug 3 (Reuters) - The dollar extended gains versus the yen but fell against the euro on Monday after a U.S. index showed manufacturing shrank in July but at a slower pace than in June.
"The U.S. ISM continues the trend of better data from overnight. But that doesn't mean that the U.S. is out the woods," said Brian Kim, a currency strategist at UBS AG, in Stamford, Connecticut. "Overall though, the improvement in U.S. economic data should further boost risk-seeking and weigh on the dollar for now."
The dollar rose to 0.6 percent to 95.23 yen from around 95.08 yen before the report. The euro was up almost 1 percent at $1.4389, from $1.4322 prior to the release.
The Institute for Supply Management said its index of national factory activity rose to 48.9 in July from 44.8 in June. The median forecast of 72 economists surveyed by Reuters was for a reading of 46.2.
A reading below 50 indicates contraction in the manufacturing sector.
(Additional reporting by Gertrude Chavez-Dreyfuss) (Editing by Theodore d'Afflisio)