* Reported sterling demand from corporates, Asian investors * Pound rises despite weaker-than-forecast PMI data * Investors still upbeat on economy, trim QE bets By Nia Williams LONDON, Nov 1 (Reuters) - Sterling hit a two-week high against the dollar on Thursday, shrugging off weaker-than-expected manufacturing data that did little to dent recent cautious optimism on the UK economy. The manufacturing PMI index for October fell to 47.5, below expectations of a drop to 48.0 and further below the 50 mark that separates growth from contraction. The data highlighted risks to the UK's tentative economic recovery but analysts said the market had been braced for a weak number, which limited its impact. Investors were still upbeat on sterling after third-quarter gross domestic product data last week showed the economy emerged from recession. Traders reported buying by corporates and Asian real money investors that lifted sterling by 0.3 percent to $1.6176, its highest level since Oct. 17. An earlier break triggered reported stop-loss orders around $1.6145. Better sentiment towards the UK has prompted many market players to trim bets on more quantitative easing from the Bank of England next week. QE tends to weigh on a currency as it increases its supply. "There's been some improvement in underlying sentiment. Most people were looking for further QE in November but based on data and comments from the various MPC (Monetary Policy Committee) members that seems less likely now, and all that has supported sterling," said Raghav Subbarao, FX strategist at Barclays. Data from mortgage lender Nationwide on Thursday also showed house prices rose faster than forecast in October. Some strategists warned though that investors may have been too hasty in pricing out the possibility of more QE, given GDP data is backward-looking. PMI surveys for the construction industry on Friday and the dominant services sector on Monday will provide a better gauge of the resilience of UK growth. SAFE HAVEN FLOWS SLOWING? The euro fell 0.3 percent against the pound to 80.04 pence, nearing a last week's low at 80.02 pence. A break below that level would take the euro to its weakest level in a month, with support expected around the 100-day moving average at 79.67 pence. The euro has looked vulnerable to uncertainty about whether Greece will secure more financial aid and when Spain may ask for a bailout, but if those concerns abate sterling could struggle. The pound has benefitted in recent months from being seen as a relative safe haven by investors seeking to cut exposure to turmoil within the euro zone. "Developments within Europe and whether safe haven flows come through are more important (than QE). If those flows start to slow down that does expose sterling to more negative fundamentals," said Ian Stannard, head of European FX strategy at Morgan Stanley. Some analysts said data from the Swiss National Bank (SNB) on Wednesday showing the proportion of euros in its reserves had shrunk could also weigh on the pound. The SNB had been buying euros to defend a 1.20 franc floor in euro/Swiss, and diversifying those euro purchases into other currencies including sterling. But with its euro exposure back below 50 percent the SNB will have less need to diversify into other currencies, removing a source of demand for sterling.

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