* Dollar dips vs yen and euro as risk aversion eases
* Friday's U.S. jobs data not as bad as some had feared
* Dollar index off last week's three-year peak
By Masayuki Kitano
TOKYO, March 9 (Reuters) - The dollar dipped against the yen and euro on Monday as investors trimmed safe-haven buying of the greenback after last week's U.S. payrolls data showed that job losses were less severe than many had feared.
The U.S. unemployment rate rose to a 25-year high of 8.1 percent in February as employers cut 651,000 jobs, data showed on Friday.
The fall in payrolls was not as bad as the market's worst expectations, and the data pressured the dollar on Friday.
The dollar is still viewed as a safe-haven currency and tends to attract buying when worries about the global economy and financial markets flare up, but can come under pressure when such concerns recede.
"Ahead of the jobs report there had been rumours about a possible loss of 1 million jobs, but the result turned out to be basically in line with expectations," said a trader for a Japanese trust bank.
The dollar fell 0.4 percent against the yen to 97.94, having pulled back from a four-month high of 99.69 yen hit on trading platform EBS last week.
The yen showed limited reaction to data showing that Japan recorded an unadjusted current account deficit of 172.8 billion yen in January, its first such deficit in 13 years.
The euro rose 0.6 percent to $1.2713. The single European currency fell to as low as $1.2457 last week, its lowest since Nov. 21.
Weekly candlestick charts on many major currency pairs showed long shadows last week, suggesting that currency markets were lacking a clear sense of direction, the trust bank trader said.
Long shadows, when accompanied by small bodies on weekly candlestick charts, mean that while trading ranges during the period may have been wide, currency levels at the end of the week did not differ too much from the end of the prior week.
Market players said the dollar may start to lose some steam. The dollar hit a three-year high against a basket of major currencies last week.
"We could see a continuation of a scenario where the dollar rises due to market players' needs for cash, but such a scenario seems a bit unnatural to me," said a trader for a Japanese currency broker.
The yen, however, seems unready to attract safe-haven buying at this point, especially given political uncertainty in Japan.
Two surveys showed on Sunday that about 60 percent of Japanese voters want opposition leader Ichiro Ozawa to resign after the arrest of a senior aide in a funding scandal that has clouded his party's prospects in a looming election.
The dollar index stood at 88.177, having retreated from a three-year peak of 89.624 hit last week.
Sterling was 0.5 percent higher at $1.4152.
Britain's Lloyds Banking Group said on Saturday that the British government will get a stake of up to 77 percent in the bank after agreeing a deal to underwrite 260 billion pounds ($370 billion) of risky assets.
Lloyds is following Royal Bank of Scotland in putting billions of pounds of risky assets into the scheme in return for giving the government a bigger stake.
Since Lloyds' scheme follows what RBS has done, the impact on sterling could turn out to be limited, said the trader for a Japanese trust bank. (Editing by Chris Gallagher)