* Dollar rises vs yen on U.S. ISM manufacturing data
* Dollar index close to 6-month high
* Euro gains but outlook still negative (Updates prices, adds comment)
By Gertrude Chavez-Dreyfuss
NEW YORK, Feb 1 (Reuters) - The dollar rose against the yen on Monday, and higher-yielding currencies such as the Australian and New Zealand dollars also gained as data showing manufacturing growth worldwide strengthened optimism about a global economic recovery.
The euro firmed, snapping four straight days of declines and rising in line with stocks as risk appetite increased amid the upbeat sentiment on growth. Over the past year, the euro has become a proxy for risk appetite among developed-nation currencies.
A rise in U.S. factory activity to a 5-1/2-year high in January, according to an index of the Institute for Supply Management, added to the optimism on the economy. [ID:nN01363414]
In Europe, the euro zone manufacturing sector grew at its fastest pace in two years last month, according to the Markit Eurozone Manufacturing Purchasing Managers' Index. [ID:nLAG006081]
"The U.S. data certainly bodes well for the manufacturing sector going into the first quarter and that's supportive of dollar/yen," said Dean Popplewell, chief currency strategist at FX brokerage firm OANDA in Toronto.
In late afternoon trading, the dollar was up 0.3 percent <JPY=> at 90.61 yen.
The euro traded up 0.5 percent at $1.3932 <EUR=>, not far from an earlier low of $1.3854, according to Reuters data, its weakest level since early July.
Traders said the next downside level to watch was $1.3850, where a large option barrier was said to reside.
The outlook on the euro, however, remains negative, OANDA's Popplewell said. Greece's fiscal woes remain in the forefront of investors' concerns, and the big question in the near term is whether euzo zone monetary authorities will bail out the troubled country.
The European Union's Economic and Monetary Affairs commissioner, Joaquin Almunia, said in a Reuters interview that Greece's fiscal cutback plans were "ambitious but achievable." [ID:nBFA001042]
"Overall, the dollar is basically just giving up ground versus the euro because the general consensus is that its gains last Friday were overdone," said Popplewell, who sees the dollar resuming its uptrend in the next few days.
The dollar index, a calculated measure of the greenback's performance against six major currencies, was down 0.3 percent at 79.191, off an earlier high of 79.534 <.DXY>, its strongest since late July.
Earlier in the session, the Australian dollar fell to its lowest level since mid-December versus the dollar and yen as investors unwound yen-funded carry trades. That move came after a newspaper report cited Adair Turner, chairman of Britain's Financial Services Authority, saying that such trades were "economically valueless." [ID:nLDE60S2G5]
Turner was speaking after a private session on casino banking and regulation at the World Economic Forum in Davos.
The Aussie dollar later rose <AUD=> to US$0.8916, up 0.8 percent, and was up 1.2 percent against the yen, to 80.81 yen <AUDJPY=R>.
The Reserve Bank of Australia is expected to raise interest rates by 25 basis points on Tuesday. A Reuters poll showed all 20 economists surveyed predict a hike [AU/INT].
"A rate hike is pretty much a done deal, and if the RBA fails to deliver they stand the risk of triggering a very sharp sell-off in the Australian dollar," said Kathy Lien, director of FX research at GFT in New York.
"Although this would be welcomed by the central bank because a weaker currency stimulates the economy, recent economic data (like the) manufacturing numbers suggest that the Australian economy does not need more stimulus."
The New Zealand dollar also rose to US$0.7088 <NZD=>, up 1.1 percent on the day. (Additional reporting by Nick Olivari; Editing by Leslie Adler)