FOREX-Dollar, yen rise, boosted by Euro zone debt worries

* Euro tumbles on Portugal, wider euro zone debt worries

* Yen soars to near one-year highs vs euro

* US payrolls slip, but jobless rate falls, helping dollar (Recasts, updates, prices, adds comment, byline)

By Gertrude Chavez-Dreyfuss

NEW YORK, Feb 5 (Reuters) - The U.S. dollar and yen gained on Friday as persistent worries about the euro zone's fiscal stability pushed investors further away from risky assets and into traditional safe-havens.

The cost of insuring debt of Greece, Portugal and Spain against default hit record highs, according to CMA Data Vision, as Portugal backed a law that may further enlarge its swollen budget deficit. That caused further jitters and pushed the euro to an 8-1/2 month low versus the dollar and a near one-year trough against the yen.

"This is an extension of what we've been seeing the last few weeks. The market is nervous about contagion spreading in Southern Europe," said Dean Popplewell, chief currency strategist at FX brokerage firm OANDA in Toronto.

"You see that sovereign debt of Greece, Spain and Portugal are all under threat and this is certainly weighing on the euro. So the directional trend in the dollar remains intact, with investors keen to take the dollar higher by default."

Fear about the euro zone's fiscal deficits have overshadowed a key U.S. non-farm payrolls report for January, which showed job losses of 20,000, but a drop in the unemployment rate to 9.7 percent from 10 percent in December. See [ID:nN04115255].

Popplewell said investors seemed happy about the decline in the U.S. unemployment rate and that's partly contributed to gains in the dollar.

In early afternoon trading, the euro fell 0.7 percent on the day to $1.3632 after falling as low as $1.3586, according to Reuters data, the lowest since May 2009.

For the week, the euro is on track to post a 1.7 percent fall at current prices, its fourth consecutive week of losses. The single European currency has tumbled around 10 percent from its December 2009 high around $1.5140.

The euro fell to 120.72 yen , the lowest since Feb. 24, 2009. It was last at 121.68, down 0.5 percent.

Investors tend to buy the yen and dollar in times of heightened risk aversion as they unwind trades in risky assets financed by both currencies' near zero interest rates.

The ICE Futures' dollar index <.DXY>, a calculated measure which tracks the greenback's performance against a currency basket, climbed to 80.683, its strongest since July 2009. It last traded up 0.7 percent at 80.475.

(Additional reporting by Nick Olivari; Editing by Andrea Ricci)