* Optimism about U.S. economy lifts risk appetite
* U.S. Feb payrolls fall 36,000, less than expected
* BOJ may debate easing again this month-sources
* Aussie, kiwi post best daily rise in months vs yen (Updates prices, adds comment)
By Wanfeng Zhou
NEW YORK, March 5 (Reuters) - The dollar rose against the yen on Friday after a government report showed U.S. employers cut fewer jobs than expected last month, stoking optimism about an economic recovery.
The Japanese currency also dropped versus the euro and higher-yielding currencies such as the Australian and New Zealand dollars as the data encouraged investors to buy risky assets funded by cheaply borrowed yen.
The U.S. economy shed a smaller-than-expected 36,000 jobs in February, Labor Department data showed, leaving the unemployment rate unchanged at 9.7 percent. Analysts polled by Reuters expected payrolls to drop by 50,000, with the jobless rate edging up to 9.8 percent. For more, see [ID:nN04252324]
"It was a risk appetite event," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York. "The fact that the U.S. labor market is in better shape than we were thinking supports the U.S. recovery story and it encourages market participants to put on risky trades."
The dollar rose as high as 90.58 yen
Rising Treasury yields also helped lift dollar/yen, which has been more sensitive to U.S. interest rate expectations lately, analysts said. After the data, U.S. short-term interest rate futures showed expectations the Federal Reserve would raise its key target rate later this year rose. See [ID:nN05202417]
But Richard Franulovich, senior currency strategist at Westpac in New York, said the jobs data would not lead the Fed to bring forward rate hikes. "I think they would have to wait for three to four months of positive employment numbers," he said.
The euro rose 1.7 percent to 122.99 yen
The Japanese currency also came under pressure after sources said the Bank of Japan was likely to debate this month whether to ease its ultra-loose monetary policy again as it remained under government pressure to help pull Japan out of deflation. [ID:nTOE6230A7]
Against the greenback, the euro rose as high as $1.3629, according to Reuters data, reversing earlier losses as higher stock and commodity prices lifted risk appetite. It last traded at $1.3613, up 0.3 percent on the day
Concerns about debt problems in Greece eased after a sale of 10-year bonds on Thursday attracted strong demand. The spread between yields on Greek government bonds and euro zone benchmark German bunds narrowed on Friday.
Traders were watching for the outcome of a meeting between German Chancellor Angela Merkel and Greek Prime Minister George Papandreou in Berlin on Friday. Merkel said on Wednesday she would offer no financial aid to Greece. The two leaders were scheduled to hold a news conference at 12:30 p.m. (1730 GMT).
"I think the Greek situation and sovereign debt in general is going to continue to pop its head up every now and then," said Ronald Simpson, director of currency research at Action Economics in Tampa, Florida. "For now it appears it's subsided."
The ICE Futures U.S. dollar index, which tracks the greenback versus a basket of currencies, was down 0.1 percent at 80.488 <.DXY>. (Additional reporting by Gertrude Chavez-Dreyfuss; Editing by Andrea Ricci)