* Dollar falls vs basket of currencies, off 3-yr high
* Investors brace for US jobs data expected to be dire again
* Euro, sterling jump more than 1 pct vs dollar
By Satomi Noguchi
TOKYO, March 6 (Reuters) - The dollar tumbled on Friday, retreating from a three-year peak against a basket of currencies hit this week, as investors braced for data expected to show an acceleration in U.S. job losses last month.
It shed more than 1 percent against the Swiss franc and fell steeply against the euro and sterling as traders readied for an expected rise in unemployment in the world's largest economy.
Economists expect 648,000 jobs were lost in the United States in February after 598,000 were shed in January, and see the unemployment rate rising to a 25-year high of 7.9 percent from 7.6 percent the previous month.
But traders said talk of a much larger-than-forecast number hit the greenback as European traders came in, with speculation that as many as 1 million people could have lost their jobs.
"I had expected some dollar longs would be trimmed but the move is very extreme," a trader at a Japanese trust bank said.
Dealers said the Swiss franc had exacerbated the dollar's fall, as it had strengthened sharply against the euro following an interest rate cut by the European Central Bank on Thursday.
The dollar dropped 1.6 percent against the Swiss franc to 1.1511 francs. The euro fell more than half a percent against the franc.
The dollar index, a gauge for its performance against six major currencies, fell 0.9 percent to 88.188, off a three-year high of 89.624 struck on Wednesday and short of a key technical level at 89.90.
The greenback had risen on Thursday on its perceived safety status after Wall Street slid, with the Dow and S&P falling to 12-year lows on General Motors' warning of possible bankruptcy and concerns about the banking system.
The euro rose 1.2 percent from late U.S. trade to $1.2686. It had fallen below $1.2500 on Thursday after the ECB cut interest rates by a half-percentage point to a record low.
Sterling climbed 0.9 percent to $1.4246, rebounding from a fall the previous day after the Bank of England cut interest rates to a record low and said it would start buying 75 billion pounds ($106 billion) of assets to boost the British economy.
YEN ALSO RISES
The dollar had gained on the yen earlier in the day, a move traders said was driven in part by foreign investors pulling funds out of Japanese stocks, as worries persist about Japan's economy, now in its deepest slump in more than three decades.
The Nikkei share average slid 3.5 percent to a four-month closing low, erasing gains made the previous day on hopes for bigger economic stimulus plans in China.
But the dollar then slipped 0.5 percent to 97.61 yen, extending its fall from 99.69 yen touched on Thursday, its highest level since early November. (Additional reporting by Shinji Kitamura and Charlotte Cooper; Editing by Michael Watson)