NEW YORK (Reuters) - The US dollar and yen fell versus the euro on Friday after bleak US jobs data spurred hopes Congress will act quickly to pass a stimulus package to help the economy, reviving investor appetite for risk.

Wall Street stocks rallied despite news from the Labour Department showing employers slashed 598,000 jobs in January, the deepest cut in monthly payrolls in 34 years. The dismal figures may provide an incentive for US lawmakers to support the Obama administration's fiscal stimulus program and its bank rescue plan, traders said.

Extreme risk aversion amid worries about the global economy and about banks has benefited the dollar and yen, which are perceived as safer places to park money in times of stress.

"It's really the yen crosses where we are seeing the most movement. We're largely trading in sympathy with the rally in the stock market, which is still the bellwether for risk aversion," said Michael Woolfolk, senior currency strategist at Bank of New York Mellon in New York.

"It's the anticipation of Monday's announcement by (President Barack) Obama and (Treasury Secretary Timothy) Geithner and that the administration will deliver everything the market wants," he added.

In late trading in New York, the euro rose 1.2 percent to $1.2934.

The single European currency gained about 1.2 percent this week versus the greenback, its first weekly rise in 2009.

But it remained about 12 percent lower from a three-month high above $1.47 hit last December.

Against the yen, the euro rallied 2.1 percent to 118.92 yen.

The dollar rose 0.9 percent to 91.960 yen, and advanced 2.2 percent this week, the best weekly rise against the yen since November.

The US Senate struggled on Friday to craft the estimated $937 billion stimulus package, but stock prices rose on hopes of an agreement after Senate Majority leader Harry Reid said he believed the chamber would "be able to work something out".

US Treasury Secretary Timothy Geithner will spell out a "comprehensive plan" today to stabilise the financial system.

"Looking beyond today's terrible (jobs) figures, now everybody expects the President's rescue plan to pass and pass fast," said Gregory Salvaggio, a vice-president for trading at Tempus Consulting in Washington. "That is helping lift stocks and is taking some risk off the table."

The improved risk sentiment also boosted higher-yielding currencies including the Australian and New Zealand dollars, both of which soared more than three percent against the greenback.

Despite hopes of a passage of the stimulus bill, analysts cautioned that governments worldwide still face daunting tasks of putting their economies back on track and corporate earnings are set to deteriorate further.

January's figures brought total US job losses in this recession to 3.6 million, the worst uninterrupted streak of losses since World War Two.

"People are waiting to see what's going to happen next week with Geithner's comments on Monday," said Dustin Reid, senior currency strategist at RBS Global Banking and Markets in Chicago.

"The market is still biased towards negative risk sentiment, or risk aversion," he added. "There's a lot of concern over future corporate earnings for the second half of this year."