FOREX-Yen slips broadly after U.S. August jobs report

* Dollar rises vs yen, euro after U.S. jobs report

* Payrolls fall 216,000, smallest decline in a year

* Unemployment rate rises to 9.7 pct, highest in 26 years

* Canadian dollar rallies after employment data

(Recasts, updates prices)

By Nick Olivari

NEW YORK, Sept 4 (Reuters) - The yen fell on Friday on news U.S. employers cut fewer jobs than expected in August, reinforcing recent data indicating an economic recovery and dimming safe-haven demand for the Japanese currency.

Trading was volatile however with many investors and traders leaving early ahead of the U.S. Labor Day holiday.

The U.S. economy cut 216,000 jobs in August, while the unemployment rate rose to 9.7 percent, the Labor Department said on Friday. Analysts had expected nonfarm payrolls to drop by 225,000 and the unemployment rate to rise to 9.5 percent. For more see [ID:nL4577554].

Strategist Camilla Sutton said the jobless rate kept alive fears unemployment would continue to rise while the payrolls result showed the pace of losses was slowing.

"It's a little bit mixed in terms of the number and that's fairly evident from the market's reaction afterwards," said Sutton, at Scotia Capital in Toronto.

In late afternoon trading in New York, the dollar was up 0.4 percent against the yen at 93.01 yen JPY=, after hitting a session low of 92.26 yen.

The euro rose 0.4 percent to $1.4303 EUR=, near the session high of $1.4327, and against the yen was up 0.8 percent at 133.02 yen EURJPY=R.

"When the dust settles on nonfarm payrolls, it's positive for the high yield currencies by boosting risk appetite," said Kathy Lien, director of currency research at GFT Forex.

The yen also fell against other major rivals, with sterling up 0.8 percent GBPJPY= and the Australian dollar up 1.8 percent AUDJPY=.

The dollar fell 0.3 percent against the yen over the last five trading sessions, its fourth straight weekly decline. It has lost 4.7 percent in the last four weeks. It lost 6.1 percent in the four weeks to July 12.

For the week. the euro was little changed against the dollar.

CANADIAN DOLLAR RALLIES

The August payrolls number followed U.S. manufacturing and service sectors data earlier this week and supported the view the recession is coming to an end, although the outlook for a recovery remained uncertain.

"The economy needs to generate jobs, and until we get near zero or go positive, it's still a tremendous drag on the economy," said Joseph Trevisani, senior market analyst at FX Solutions in Saddle River, New Jersey. "The evidence of what's going on is that we're seeing only a very slow change."

Uncertainty about the global economy may lead to a pullback in risk-seeking, benefiting the dollar and yen in the coming months, said Brian Kim, currency strategist at UBS in Stamford, Connecticut.

Scotia's Sutton said the price of gold is providing interesting indications of risk appetite. "There's been a dramatic move higher in gold," she said. "There're many who think that's really indicating that risk aversion is about to jump higher, which would be bad for equities and good for the U.S. dollar."

The Canadian dollar rallied, with the U.S. currency falling 1.5 percent to C$1.0858 CAD=, according to Reuters data, buoyed by an unexpected rise in employment in Canada in August. [ID:nOTT001697].

Investors also looked ahead to a meeting in London this weekend of finance ministers from the Group of 20 rich and developing nations. G20 policymakers will promise to keep economic support packages in place until recovery is certain. [ID:nLQ516726] (Additional reporting by Steven C. Johnson) (Reporting by Nick Olivari and Wanfeng Zhou)