* Euro up 1.5 percent vs dollar
* Euro recovers on higher Bund yields, German data
* Dollar off 13-year highs against yen (Recasts, adds late prices, quotes)
By Michael Connor
NEW YORK, June 8 (Reuters) - The dollar dropped 1.5 percent against the euro and slipped from 13-year highs against the Japanese yen on Monday, as European sovereign yields rose and investors pared bets on the greenback driven by Friday's robust U.S. jobs data.
The euro was nearing $1.13 against the dollar, driven in part by rising German Bund yields and solid German data that stoked optimism about the euro zone's economic prospects.
U.S. Treasury yields declined on Monday, narrowing spreads between American and European markets.
"A lot of people are quite skeptical that this payroll data we had on Friday is really a true reflection of how strong the economy is," said Jens Nordvig, global head of currency strategy at Nomura Securities International in New York.
"They think the price action we had on Friday was a bit too optimistic."
The dollar earlier fell after a Bloomberg wire service report that cited President Barack Obama as saying the strong dollar was "a problem" during conversation at the Group of Seven (G7) summit in Germany.
"I did not say that, and I make it a practice of not commenting on the daily fluctuations of the dollar or any other currency," Obama told a news conference. The dollar recovered initially before sliding through the rest of the session.
Despite the denial, currency investors were wary as Federal Reserve officials have in recent months expressed concerns about the effect of a robust greenback on growth and exports.
"Maybe he didn't say it, but the report highlighted an undercurrent of discomfort with the level of the dollar," said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey.
The dollar was last off 0.9 percent at 124.42 yen, having hit a 13-year high of 125.86 yen on Friday after the unexpected strength in U.S. job growth.
The dollar index was down 1.1 percent.
The euro was helped by the rise in German yields and better-than-expected industrial output figures showing a 0.9 percent increase in Germany during April.
The euro was last up more than 1 percent against sterling and 0.60 percent against the yen. (Editing by Bernadette Baum and Meredith Mazzilli)