* Dollar on pace for best week in 3-1/2 months vs yen * Euro on track for worst week vs dollar since late September * U.S. economy adds 171,000 jobs; unemployment rate 7.9 pct * Overall good jobs picture, but economy needs more - analyst By Gertrude Chavez-Dreyfuss NEW YORK, Nov 2 (Reuters) - The dollar rose to a more than six-month peak against the yen and a three-week high versus the euro on Friday after data showed the U.S. economy created more jobs than expected last month. The greenback was on track to post its largest weekly gain in more than three months against the yen. It was also poised to have its best week against the euro since late September in the aftermath of the U.S. employment report. For October, U.S. employers added 171,000 jobs, well above the market consensus of 125,000. The government also said 84,000 more jobs were created in August and September than initially estimated. The unemployment rate, however, ticked higher to 7.9 percent, in line with market expectations. "The rally in the dollar makes perfect sense because the world's largest economy is showing signs of re-emerging from the summer lull faster than in other parts of the world," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York. For some analysts, though, merely beating consensus estimates for U.S. jobs would not be sufficient to turn things around for the labor market. Joseph Trevisani, chief market strategist at Worldwide Markets in Woodcliff Lake, New Jersey said job creation in the United States will have to double in order to bring unemployment near 7 percent. The dollar hit a high of 80.67 yen, its highest since April 27. It was last at 80.54, up 0.5 percent. On the week, the dollar advanced 1.1 percent versus the Japanese currency. The yen has also come under pressure because recent Japanese data and corporate earnings have been soft. Third-quarter economic output data, due on Nov. 11, is also likely to have contracted. The dollar index rose to a nearly two-month high of 80.573 . It was last at 80.537, up 0.6 percent. The index has gained for a second straight session. Some, however, are less sure about a sustained rise in the dollar as investors fret over the so-called "fiscal cliff" of looming tax rises and spending cuts in the United States. "Over the course of the next month we would expect to move lower in dollar/yen. Any upside above 81 would be surprising (given the) U.S. negativity surrounding the fiscal cliff," said Christian Lawrence, currency strategist at Rabobank. The euro, meanwhile, slid to $1.2846, its lowest since October 11. It last traded at $1.2847, down 0.7 percent. The euro has also been weighed down by a Greek court ruling on Thursday indicating that pension reform demanded by foreign lenders may be unconstitutional. That raised concerns about Athens' ability to implement the austerity measures needed to secure bailout funds The euro zone's common currency, however, has held within the $1.2800-3200 range seen since September, underpinned by the European Central Bank's pledge to buy the bonds of indebted euro zone countries that seek aid. Signals in the option market showed the pair was likely to trade in a range in coming weeks. The one-month implied volatility on euro/dollar options fell to 7.55 percent .
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