* Yen soars to nearly 1-year high vs euro
* Euro hits lowest vs dollar since May 2009
* Markets look to Friday's US non-farm payrolls data
* ECB leaves rates on hold, BoE pauses QE program (Updates prices, adds comment)
By Gertrude Chavez-Dreyfuss
NEW YORK, Feb 4 (Reuters) - The dollar and yen soared on Thursday as fears about the euro zone's worsening fiscal problems and a less-than-stellar U.S. jobless claims report drove investors to abandon riskier assets for traditional safe havens.
The euro plunged to a more than eight-month low against the dollar and sank to a nearly one-year trough against the yen amid concerns over the fiscal health of debt-laden euro zone economies such as Greece, Portugal and Spain. It was the worst day for the euro against the yen since November 2008.
The dollar, on the other hand, fell to a roughly seven-week low against the surging yen, weighed down by weaker-than-expected U.S. jobless claims data. That diminished optimism about Friday's key non-farm payrolls report for January.
Thursday's drop was the largest one-day fall in the dollar against the yen since July 2009.
"There's a lot of risk aversion in the market, a lot of concern over what's happening in Europe," said Steven Butler, director of FX trading at Scotia Capital in Toronto.
"I think the market is coming to grips with the fact that things are going from bad to worse, so we're seeing flight-to-quality trades -- out of euros and into the dollar and yen."
Investors tend to buy the dollar and yen in times of heightened risk aversion as they unwind risky trades in higher-yielding assets financed by both currencies' low rates.
On Wall Street, U.S. stock indexes [.N] also fell, as did commodities, with crude futures <CLc1> plunging more than 5 percent, while spot gold <XAU=> dropped 4.2 percent.
In late afternoon trading, the euro fell 3.3 percent against the yen to 122.20 after earlier dropping to a nearly one-year low at 121.60 <EURJPY=>, according to Reuters data.
The dollar fell as low as 88.58 yen <JPY=>, the lowest since mid-December. It last traded at 88.93 yen, down 2.2 percent.
The euro <EUR=> was trading down 1.2 percent on the day against the dollar at $1.3739, after earlier hitting its lowest in more than eight months at $1.3729. Weakness was partly attributed to widening Greek, Portuguese and Spanish bonds' yield spreads over German benchmarks. [GVD/EUR]
The euro was also pressured by comments from European Central Bank President Jean-Claude Trichet that many members of the euro zone will have large and sharply rising fiscal imbalances. For details, see [ID:nECBNEWS]
Trichet spoke at a news conference on Thursday after the ECB left its benchmark lending rate unchanged at 1 percent. He said high public debt and deficits would place additional burdens on monetary policy.
Sterling was also hammered, falling to its lowest in nearly four months at $1.5733 <GBP=> and was last down 0.9 percent at $1.5748. Earlier in the session, the Bank of England announced a pause in asset purchases under quantitative easing, as expected. It left the door open to more purchases should the outlook warrant it. [ID:nLAC005630]
On Friday, the market would be looking to the all-important U.S. non-farm payrolls data, with markets forecasting 5,000 jobs added to the economy last month. Analysts would be also be looking at the unemployment rate including possible downward revisions to previous estimates on jobs.
The dollar's reaction though would be difficult to predict given the interplay between risk aversion, which tends to boost the greenback, and economic fundamentals, which have recently become a factor in dictating the currency's direction.
"Even if we get a January print that is (better than expected), we think any ensuing dollar rally could be capped by the extent of the accompanying downward revisions," said Jacqueline Douglas, currency strategist, at TD Securities in Toronto.
"We would recommend being very cautious in attempting to trade off the headline number alone," she said.