* U.S. Sept job losses raise doubts about recovery
* U.S. unemployment rate rises to 9.8 percent
* Euro on track for worst week since June (Updates prices, adds comment)
By Wanfeng Zhou
NEW YORK, Oct 2 (Reuters) - The U.S. dollar fell against most major currencies on Friday after a weaker-than-expected jobs report reinforced expectations U.S. interest rates will stay near zero for some time.
U.S. employers cut 263,000 jobs in September, far more than expected, while the unemployment rate rose to 9.8 percent. The data raised fears the weak labor market could impede the economy's recovery from its worst recession in 70 years.
"The jobs data is bad and officials still perceive the economy as weak. Obviously it's going to reinforce the low rates for longer," said Brian Kim, currency strategist at UBS in Stamford, Connecticut.
The prospects of low U.S. yields have weighed heavily on the dollar in recent weeks. Speculation has grown that the greenback is replacing the yen as the primary funding currency in carry trades, in which investors borrow in low-yielders to reinvest in assets with greater returns.
In afternoon trading, the euro
Investors initially bought the dollar after the jobs report in a flight-to-safety bid as U.S. stocks prices fell on the news. The buying faded though as stocks recovered in afternoon trade in New York.
"The problem for the U.S. economy has shifted from loss of jobs to the lack of jobs growth, which is likely to put further pressure on the White House and Congress to devise further jobs stimulus efforts," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.
Woolfolk added that the U.S. dollar downtrend remains intact "and will be until the Fed signals it will begin lifting interest rates."
Despite the euro's gains, however, the euro zone currency was on track for its worst week since early June.
Against the yen, the dollar was little changed at 89.51 yen
The ICE Futures dollar index <.DXY>, which tracks the greenback versus a basket of six other currencies, dropped 0.4 percent to 76.916, but the index looked likely to end up for the week.
The U.S. currency, however, was supported against high-yielding "commodity" currencies such as the Australian dollar, which was hit by a slide in European shares <.FTEU3> and lower crude-oil prices.
Alan Ruskin, chief international strategist at RBS, said traders were worried about the U.S. or world economy should avoid buying the dollar and instead go short commodity-linked currencies like the Australian dollar against the euro or yen.
Any talk at a Saturday G7 meeting in Turkey of rebalancing the world economy, a process that would require a weaker dollar, could also add pressure to the greenback. A source told Reuters Friday that G7 policymakers are not expected to change their usual language on currencies in a communique on Saturday. See [ID:nFCC000031]. (Additional reporting by Gertrude Chavez-Dreyfuss and Steven C. Johnson)