FOREX-Dollar falls to 6-week low vs yen on payroll shock

* U.S. payrolls data show steepest fall in 34 years

* Dollar falls to 6-week low vs yen, but rises vs euro

* Markets fully price another half-point rate cut

* For up-to-the-minute market news, click on FXNEWS (Recasts, updates prices, adds quotes, changes byline, dateline; previous LONDON)

By Gertrude Chavez-Dreyfuss

NEW YORK, Dec 5 (Reuters) - The dollar fell to a six-week low against the yen on Friday after government data showed the U.S. economy lost more than half a million jobs in November, the worst performance in 34 years.

The dollar, however, rose against the euro, as investors again sought shelter in the U.S. currency away from European currencies on darkening prospects for economies worldwide.

"The much weaker-than-expected November result alongside a sharp downward revision to October suggests the U.S. recession underway is going to be a long one," said Stephen Malyon, chief currency strategist at Scotia Capital in Toronto.

"The U.S. dollar has weakened, indicating that fundamental gravity might finally be weighing on the currency," he added.

In early New York trading, the dollar fell as low as 91.60 yen , the lowest since Oct. 24, according to Reuters data. It was later at 91.85, down 0.3 percent on the day.

The euro held losses against the dollar to $1.2660. It earlier rose as high as $1.2732, in the wake of the payrolls report.

The dollar rose 1.5 percent against the Swiss franc to 1.2123 francs , while sterling fell 0.4 percent to $1.4615 .

Data on Friday showed U.S. employers cut payrolls by a shocking 533,000 in November, the steepest monthly loss since 1974, as recession in the world's largest economy deepened. Markets were expecting job losses of 340,000, according to Reuters data. For report, click on [ID:nN05444819].

The unemployment rate likewise rose to 6.7 percent, the highest since 1993.

"The November employment report was staggeringly poor, even for a market increasingly inured to ugly data," said Alan Ruskin, chief international strategist, at RBS Global Banking and Markets in Chicago.

"Is there any good news? Only in so much as it will be hard to get worse numbers ... There are simply no redeeming features in this data. Weakness is evident everywhere," he added.

The gloomy jobs data further bolstered expectations of another interest rate cut by the Federal Reserve.

Interest rate futures now fully price a 50 basis-point Fed rate cut on Dec. 16, which would take the federal funds rate to 0.50 percent. The implied prospects for a cut to 0.25 percent jumped to 76 percent from 64 percent late on Thursday. (Additional reporting by Nick Olivari; Editing by James Dalgleish)

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