FOREX-US dollar rises vs yen on housing data, Fed comments

* US dollar rises vs yen to session high

* US July existing home sale pace fastest in 2 years

* Bernanke says prospects for return to global growth good

(Adds comments, details)

By Vivianne Rodrigues

NEW YORK, Aug 21 (Reuters) - The U.S. dollar rose versus the yen on Friday after a report showed better-than-expected U.S. housing data in July and Federal Reserve Chairman Ben Bernanke said prospects for return to growth in the near-term appear good both in the U.S. and abroad.

U.S. stocks extended gains and demand for the greenback rose as analysts said both headlines boosted hopes for the global economic recovery and increased risk appetite among investors.

"Existing home sales and the Bernanke speech came out simultaneously," said Alan Ruskin, global head of currency strategy at RBS Global Banking & Markets in Stamford, Connecticut. "Both Bernanke and home sales were 'all aboard' the recovery story!"

In mid-morning trading in New York, the dollar was up 0.2 percent at 94.34 yen , near a session high, after trading as low as 93.40 yen earlier, according to Reuters data.

The euro initially extended its advance versus the dollar after the headlines but it gave up most of those gains to trade last up 0.5 percent at $1.4319 .

"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," Fed Chairman Ben Bernanke said in remarks prepared for delivery to an annual Fed conference.

"Although we have avoided the worst, difficult challenges still lie ahead," he said, cautioning that the "recovery is likely to be relatively slow at first, with unemployment declining only gradually from high levels." For details, see [ID:nWEQ001325]

Meanwhile, an industry survey showed sales of previously owned U.S. homes in July notched their fastest pace in nearly two years, the strongest sign yet that housing was pulling out of a three-year slump. [ID:nN21391628]

"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 U.S. and globally," said Jacob Oubina, currency strategist, Forex.com Bedminster, New Jersey.

(Additional reporting by Wanfeng Zhou and Nick Olivari in New York)