(Reuters) - The euro rose against the dollar on Friday on expectations that U.S. jobs data would show the economy slowly recovering and on talk of the possibility the European Central Bank may lend to weak euro zone countries via the IMF.

The talk sparked hopes of some kind of solution to the euro debt crisis, pushing the euro up 0.5 percent to $1.3538, its strongest in more than a week, with traders saying it extended gains after stop loss orders were triggered about $1.3530.

A positive surprise in U.S. jobs numbers at 1330 GMT would underpin a recent string of solid U.S. data and would be likely to boost risk sentiment and lift the euro further versus the safe-haven dollar. A weaker-than-expected outcome may push investors to take more profits on recent euro gains, however.

The non-farm payrolls report is forecast to show a rise of 122,000 jobs and a steady unemployment rate of 9.0 percent.

Investors were wary of buying the single currency aggressively, however, given that it has already rallied more than 1 percent this week even as it remains vulnerable to the region's debt problems.

Johan Javeus, chief strategist at SEB in Stockholm, said he expected the data would confirm the U.S. economy is faring better than it was in the first half of the year, although it would not show a very strong recovery trajectory.

It should confirm what we've seen in other data, that things are not as bad as people thought a few months ago. In that sense I don't expect a really big reaction from this number should it come in line with expectations or slightly better, he said.

In the end, focus is on what could happen with the political process in Europe and that will take precedent.

But with investors sidelined before the jobs report, market participants showed little reaction to a speech by German Chancellor Angela Merkel, who told parliament the euro zone debt crisis could not be solved in one fell swoop and urged tighter fiscal integration.

French and German leaders are meeting next Monday to outline joint proposals to put to a December 9 EU summit, seen as yet another make-or-break meeting for the 12-year-old currency bloc.

Nervousness ahead of this summit was expected to limit any euro gains from strong U.S. jobs data.

It will just be one more piece of good data coming on the back of a few positive things this week and there may be some reaction but I wouldn't expect it to be massive, said Nomura strategist Lefteris Farmakis.

Other currencies perceived to be higher risk, including the Australian and New Zealand dollars, also rose against a softer dollar, which slipped 0.4 percent versus a currency basket to 78.026 .DXY.

A 1.5 percent rise in European share prices .FTEU3 suggested an ongoing improvement in risk appetite this week, which has prompted investors to sell the safe-haven U.S. currency.

Against the yen, the dollar edged up 0.2 percent to 77.86 yen.


The euro has held gains after rallying earlier in the week, when major central banks around the world took coordinated measures to increase dollar liquidity to prevent a liquidity crunch in markets.

Analysts said this had provided a stop-gap measure to stabilize markets for now, while adding that investors had big expectations for the EU summit next week.

Morgan Stanley said it had used the euro's gains this week to establish a renewed bearish position on the single currency as it stuck to its view of more weakness in the currency in the mid-term.

We continue to look for the market to be disappointed by the European Summit, its analysts said in a note, adding that they expected the euro to also underperform commodity currencies, particularly the Canadian and Australian dollars.

The European Central Bank hinted on Thursday it was ready to move more aggressively to tackle the crisis if politicians agree on much tighter budget controls in the euro zone, though it stopped short of detailing what exact measures it would take.

Still, there is no agreement among EU policymakers regarding how such controls could be implemented and many other problems, including securing resources to leverage the euro zone's bailout fund, linger unresolved. Analysts believe this will keep the euro on the back foot.