* Dollar index hits 7-mth high, euro/dollar at 8-mth low
* Risk aversion on euro zone debt woes, US payrolls in focus
* SNB seen selling francs in Asia, SNB, BIS decline comment
(Adds quotes, detail)
By Naomi Tajitsu
LONDON, Feb 5 (Reuters) - The dollar hit a seven-month high against a currency basket on Friday, boosted by risk aversion as the cost of insuring the debt of some euro zone nations against default hit record highs on worries over their fiscal positions.
Upward momentum in the safe-haven dollar intensified ahead of U.S. nonfarm payrolls due later in the day, pushing the euro to an eight-month low, as a slide in stocks and widening euro zone periphery government bond spreads triggered more selling in the euro.
The single European currency was unable to sustain gains made against the Swiss franc after the Swiss National Bank was seen selling the domestic currency in Asian trade, which had lifted the euro from a 15-month trough.
Fears about the fiscal health of peripheral euro zone economies mounted, pushing up the cost of insuring Greek, Portuguese and Spanish government debt against default to record highs, according to monitor CMA DataVision. [ID:nLDE6140LZ]
The yield spread between Greek and German 10-year government debt expanded from the previous day due to uncertainty about how Athens will service its debts, prompting traders to dump the euro in favour of the perceived safety of the dollar.
"These are still factors in the ongoing risk-aversion backdrop," said Stuart Bennett, currency strategist at Calyon in London, referring to the widening bond spreads.
"The market has momentum behind it, it's picking up speed, so no matter what happens, the market takes it as dollar-positive, euro-negative."
Given such circumstances, he added the dollar may appreciate more regardless of whether U.S. non-farm payrolls come in weaker or stronger than expectations at 1330 GMT. A Reuters poll shows forecasts for a flat reading in January. [ID:nN03175623]
The dollar index <.DXY>, which tracks its moves against a currency basket, climbed to 80.435, its strongest since July 2009 as European shares <.FTEU3> fell 1.7 percent on the day.
By 1221 GMT, the euro
On the week, the euro is on track to posting a 1.1 percent fall, its fourth consecutive week of losses. The single European currency has tumbled roughly 10 percent from its December 2009 high around $1.5140.
Ongoing fiscal concerns in the euro zone and looming U.S.
payrolls have cranked up implied volatility in the currency
options market, with one-week euro/dollar vols
Analysts said such a change on the day had not been seen since Lehman Brothers filed for bankruptcy in autumn 2008.
Versus the yen, the single European currency
PAYROLLS AWAITED
The euro
Investors awaited a meeting of Group of Seven central bankers and finance ministers in Canada starting later in the day, although analysts said it was unlikely that currencies would be addressed in the final communique.
Some in the market speculated that the yuan may come under discussion due to increasing calls for the Chinese currency to appreciate, although Japan's finance minister said he did not request the yuan to be on the agenda. [ID:nLDE6140QP]
"Central bankers have more to worry about than currencies at the moment, such as the withdrawal of policy stimulus, and I do not expect any reference to currencies at the G7 meeting", said Paul Robson, strategist at RBS in London. (Additional reporting by Neal Armstrong, editing by xxx)