Dollar weak after jobs report

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NEW YORK (Reuters) -- The euro hit a one-month high above $1.35 Friday after better-than-expected U.S. payrolls data bolstered hopes for an economic recovery and dented safe-haven demand for the dollar.

The euro climbed to $1.3516 after government data showed U.S. employers cut 539,000 jobs in April. While still high, that was below March's upwardly revised tally of job losses of 699,000 and the 590,000 economists polled by Reuters had expected.

The jobless rate hit a 25-year peak of 8.9%, tempering some optimism, but a bevy of improved global data this week kept risk appetite high and weighed on the dollar.

The dollar tends to suffer when risk aversion rises and investors feel they no longer need to buy it as a safe haven. It fell to a six-week low on Friday against a basket of major currencies and was on track for its third consecutive weekly decline.

"The market is positioning for recovery over the next few months, which means the dollar will clearly see considerable weakness as this plays out," said Melvin Harris, chief market strategist at Advanced Currency Markets in New York.

"The jobs data was encouraging, and any trader would tell you they've expected to see unemployment at 9 to 10% before this thing was over, so that's not a shock."

The euro was last at $1.3505 , up 0.8% from late Thursday and up 1.7% this week, en route to its best weekly performance since early April.

The dollar dipped 0.3% to 98.91 yen while sterling rose 0.4% to $1.5095.

The greenback also fell to a six-month low against the Canadian dollar and toward its worst week since late March after Canada also reported an unexpected jump in jobs last month.

Another sign of revived risk appetite was the U.S. yield curve, which measures the difference between yields on 2- and 10-year government debt. This reached its widest spread since November, reflecting falling demand for safe-haven Treasuries.

The euro, meanwhile, was boosted this week on hopes that the European Central Bank's plan to boost credit through purchases of covered bonds -- which are backed by a pool of assets that remain on a bank's balance sheet -- would help the ailing euro-zone economy.

But analysts warned that the global economy was still mired in recession and faced a number of threats. On Thursday, U.S. regulators said 10 of the nation's biggest banks must raise $74.6 billion in equity to shore up their capital cushions.

"While the economy may be getting worse at a slower rate, it is still in recession and unemployment is rising," Mizuho Corporate Bank currency strategist Nicole Elliott wrote in a note to clients, adding markets may have to face "the possibility of things not getting significantly worse but not improving much either for a very long time."