* U.S. unemployment rate falls to 8.6 percent
* ECB's Stark says crisis cure needed to avoid disaster
* Euro reverses gains ahead of key event risks next week
Updates prices, adds quotes, links and graphics, changes byline)
NEW YORK (Frankfurt: A0DKRK - news) , Dec 2 (Reuters) - The euro fell against the dollar for the first time in five sessions on Friday, with investors wary of placing aggressive bets in favor of the currency ahead of a European Central Bank meeting and a European Union summit next week.
The euro zone's common currency posted sharp gains after data showed the U.S. unemployment rate fell to a 2-1/2 year low in November (Stuttgart: A0Z24E - news) . Reports the ECB may lend to weak euro zone countries through the International Monetary Fund in hopes of easing the the debt crisis also supported it earlier in the global session.
But the euro reversed course on various market rumors, including one of a potential downgrade of Spain. Investors were also hesitant to buy the single currency in the aftermath of a strong rally this week.
"It's a very rumor-driven market so there's a lot of caution," said David Watt, senior currency strategist at RBC (MCX: RBCI.ME - news) Capital Markets in Toronto. "We also have an ECB meeting next week, which may probably cut rates," he added, noting a potential negative for the euro.
The ECB hinted Thursday it was ready to move more aggressively to tackle the crisis if regional politicians agree on much tighter budget controls, though it stopped short of detailing what exact measures it would take.
Leaders must urgently find a solution to the euro zone debt crisis or there will be widespread macroeconomic and financial disaster, Juergen Stark, one of the European Central Bank's top policymakers, warned on Friday.
The euro fell as low as $1.33630, blowing through stops at $1.34150. It was last at $1.3398 on trading platform EBS, down 0.5 percent on the day. It rose to a 10-day high of $1.35505 immediately after the U.S. non-farm payrolls report.
The U.S. unemployment rate fell to a 2-1/2 year low in November, though the pace of hiring remained too slow to suggest a significant quickening of the recovery.
The report could temper the appetite among some Federal (SES: E1:F20.SI - news) Reserve officials to ease monetary policy further.
"I guess with the superficial improvements in the U.S. jobs report, that suggests a third round of quantitative easing by the Federal Reserve is further away, which is a positive for the dollar," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey.
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INSTANT VIEW- US jobless rate drops
Graphic - U.S. payrolls: http://link.reuters.com/suf45s
Graphic - U.S. jobless rate, payroll change. http://r.reuters.com/was53s
Graphic - U.S. nonfarm payrolls by type. http://r.reuters.com/kus53s
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Despite the euro's drop, it was on pace to end the week higher by about 0.4 percent, its best weekly performance since late October.
Morgan Stanley (EUREX: DWDF.EX - news) said it was using the euro's gains this week to establish a renewed bearish position on the single currency, sticking to its view of more weakness in the currency in the midterm.
"We continue to look for the market to be disappointed by the European Summit," Morgan Stanley analysts said in a note, adding that they expected the euro to underperform commodity currencies, particularly the Canadian and Australian dollars.
The dollar rose 0.4 percent against a currency basket , to 78.646. Against the yen, the dollar rose 0.3 percent to 77.94 yen.
With the U.S. jobs data out of the way, markets were awaiting a European Union summit set for Dec. 9 for signs of progress on the debt crisis.
French and German leaders are to meet on Dec. 5 to outline joint proposals to be discussed at the EU meeting, which is viewed as yet another make-or-break meeting for the 2-year-old currency bloc.
(Additional reporting by Gertrude Chavez-Dreyfuss; Editing by Dan Grebler)
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