By Prashant Mehra

MUMBAI (Reuters) – The BSE Sensex fell 2.7 percent on Friday to its lowest close in three months, as global selloff over Europe's sovereign debt problems and U.S. jobs worries raised fresh concerns over world recovery and dented sentiment.

Traders said foreign investors unwound their positions in futures and options, indicating there could be cash outflows and put further pressure on the spot market.

The main index dropped 3.5 percent on the week, its third straight weekly fall.

"What we are seeing is dollar-carry-trade unwinding by foreign investors," said Neeraj Dewan, director, Quantum Securities. "They borrowed when the dollar was cheap and now that the dollar is recovering, they are unwinding."

The U.S. dollar has surged after investor anxiety about sovereign debt in Greece, Portugal and Spain sparked a sell-off in the euro and growth-linked currencies such as the Australian dollar.

Energy major Reliance Industries, outsourcers such as Infosys Technology and banking stocks -- all favourites with foreign funds -- were among the main losers.

Reliance fell 3.7 percent to 981.30 rupees, its lowest close in three months. Just before trading ended, CNBC TV18 business channel reported the company has submitted a $2 billion expression of interest for private Canadian firm Value Creation Inc, which holds oil sands assets.

The 30-share BSE Index ended down 2.68 percent, or 434.02 points, at 15,790.93, its lowest close since Nov. 3 and the second biggest one-day percentage fall since then. Only one component gained.