* Dollar falls almost 1 percent vs basket of currencies
* Profit taking kicks in ahead of grim news on U.S. jobs
* Euro jumps 0.9 percent vs dollar, Swiss franc gains
* IMF official sees worst downturn since second world war
(adds quotes, update prices)
By Veronica Brown
LONDON, March 6 (Reuters) - The dollar dropped against a basket of currencies on Friday as jitters about hefty U.S. jobless figures, due at 1330 GMT, gave an excuse for investors to book profit from the U.S. unit's rally to three year highs.
Economists expect the U.S. economy lost a massive 648,000 jobs in February, with the unemployment rate seen rising to a 25-year high, but traders said talk that the figure could be as many as 1 million has hit the dollar hard.
Typically, the dollar has tended to gain on bad news recently as investors look to the safety of the world's main reserve currency, but analysts said the knee-jerk reaction to the talk of such a horrendous number was to sell it.
They also said market players were adjusting positions ahead of the data after recent sharp gains that took the dollar index to a three-year high earlier this week.
"Does this move mean we're in a clear trend once again, which is moving against the dollar? I would be cautious," said Michael Klawitter, senior FX strategist at Dresdner Kleinwort in Frankfurt.
He said eastern European market tensions and discussion of further unconventional policy moves in the euro area would weigh on euro/dollar.
"It's difficult to see now that euro/dollar would start to reverse. We have seen new highs in the dollar index this week, so people are cutting back and taking some profit," he added.
At 1230 GMT, the dollar index had fallen 0.9 percent to 88.295, while the euro gained 0.8 percent to $1.2665.
The Swiss franc was also a major gainer, with the euro tumbling to a four-month low against the currency, with analysts saying the Swiss unit has briefly resumed its safe-haven status amid intensifying concerns about a severe global economic downturn.
The dollar fell 1.1 percent against the Swiss franc to 1.1557 francs, while the euro was down 0.4 percent at 1.4643 francs, having earlier dropped as low as 1.4580 francs.
The yen also gained, with the dollar tumbling 0.8 percent to 97.10 yen.
ECONOMIC WOES
Global economic concerns intensified on Friday as a top International Monetary Fund official told a UK newspaper the world's developed economies were in the deepest slump since World War Two and warned the downturn could last into next year .
Most analysts predict that ongoing global economic concerns and the worsening situation in eastern European countries will soon return to boost the dollar once more.
"The market had been expecting that big rate cuts from the European Central Bank and the Bank of England would provide the catalyst for the euro to break new lows against the dollar, but when that did not happen investors reversed their long positions," said Chris Turner, head of FX research at ING in London.
Analysts also said funding demand for dollars would also continue to prove supportive, citing a recent Bank of International Settlements study suggesting a major funding gap between U.S. assets and liabilities owed by foreign banks.
"Since there must be a short to balance out any long, the implication is that the USD is bid," Barclays Capital said in a note to clients.
The ECB and BoE cut interest rates by 50 basis points to record lows of 1.5 and 0.5 percent respectively on Thursday, with the UK central bank also beginning unconventional measures to boost the supply of money.
In an accompanying press conference, ECB president Jean-Claude Trichet signalled further rate cuts and painted a bleak picture on the economy, with staff forecasting the euro zone may contract by more than 3 percent this year.
(Additional reporting by Jessica Mortimer in London)
(Reporting by Veronica Brown; Editing by Ron Askew)