* Yen rises broadly, hits 7-week high vs dollar
* Risk aversion continues on uncertainty about economy
* US private sector sheds 298,000 jobs in August (Adds comment, details, updates prices, changes byline, changes dateline, previous LONDON)
By Wanfeng Zhou
NEW YORK, Sept 2 (Reuters) - The dollar rose against the euro, while the yen gained broadly on Wednesday after a worse-than-expected U.S. private-sector jobs report boosted safe-haven demand for the U.S. and Japanese currencies.
The yen jumped to seven-week highs versus the dollar and sterling as the data added to uncertainty about the outlook for the U.S. economy and stoked risk aversion in the market.
U.S. private employers cut 298,000 jobs in August, according to the ADP Employer Services report, jointly developed with Macroeconomic Advisers LLC. Economists had expected job losses of 250,000, although the number was fewer than a revised 360,000 jobs lost in July.
"The data ... is slightly disappointing for risk appetite, which already looks on the back foot after the most recent equity slippage," said Alan Ruskin, chief international strategist at RBS Global Banking and Markets in Greenwich, Connecticut.
The yen and the dollar have tended to gain when risk aversion rises as investors see them as safe havens in times of market stress.
In midmorning trading in New York, the dollar fell 0.4 percent to 92.51 yen, after hitting a low of 92.23 yen, according to Reuters data, its lowest since mid-July.
The yen rose against other currencies considered to be higher risk, with the euro down 0.5 percent at 131.40 yen and sterling of 0.1 percent at 149.93 yen.
The ADP report came two days before the government's more comprehensive non-farm payrolls report for August, which includes public and private sector jobs. Economists polled by Reuters are expecting job losses of 225,000 for August.
Some traders said yen gains were being driven by short-term speculators building long yen positions ahead of the Labor Department report on Friday. A weak reading may drive the dollar/yen down to the 90 yen mark, they said.
"The trend is improving but the bottom line though is that the U.S. economy is still bleeding jobs and as result we're seeing selling in risk trades in the currency market," said Win Thin, senior currency strategist at Brown Brothers Harriman in New York.
The euro held near a two-week low against the dollar, with the single currency brushing off figures confirming a 0.1 percent quarterly contraction in the euro zone economy in April-June.
The euro was last down 0.1 percent at $1.4203, after touching $1.4175 on Tuesday, the lowest level since Aug. 19.
The European Central Bank is widely expected to keep interest rates at 1.0 percent on Thursday with ECB President Jean-Claude Trichet likely to caution against growing talk of a full-blown euro zone economic recovery.
The Australian dollar rose 0.6 percent to $0.8310 after data showed Australia's economy grew at its fastest pace in over a year last quarter, supporting the case for an early rise in interest rates. (Additional reporting by Gertrude Chavez-Dreyfuss; Editing by Kenneth Barry)