NEW YORK, Oct 7: The dollar rose to its best reading since July against the euro and a seven-month high on the yen Friday as the market looked at underlying strength in what seemed like a weak US employment report.

The single European currency fetched $1.2598 against 1.2691 late Thursday in New York. That was the strongest reading for the dollar since late July.

The dollar meanwhile was trading at 118.98 yen after 117.63 on Thursday, the best level for the greenback against the yen since March.

At first sight, a report from the Labour Department that the US economy created only 51,000 jobs last month, its weakest showing since October 2005 and well below market expectations of 120,000, appeared to be negative for the dollar.

But dealers later noted that the August job creation figure had been revised up to 188,000 from 128,000, while the reading for July went from 121,000 to 123,000.

“A net upward revision of 62,000 to the gains in July and August went a long way to offsetting (the headline) disappointment, even though the trend is still downwards,” said Paul Ashworth, senior US economist at Capital Economics.

Analysts also said Friday's release, which contained upward revisions to payroll gains between April 2005 and March 2006, further cemented expectations that the US Federal Reserve will keep its benchmark Fed funds rate unchanged at 5.25 per cent for the third meeting running on October 25.

What this report does is effectively take any chance of a near-term rate cut by the Fed off the table, said Bank of New York analyst Michael Woolfolk.

“With the US economy at full employment and unit labor costs well-above the Fed's comfort zone, any Fed move over the next six months will be a rate hike, not a rate cut, he added.

The report “has turned the market very dollar bullish,” said Kathy Lien at Forex Capital Markets, who said a big factor for the market was that 810,000 jobs were undercounted in the monthly payrolls report for the 12 months up to March 2006, which is the largest revision ever.”The dollar was also supported against the euro on mounting expectations the European Central Bank will stop raising borrowing costs once it has increased its key refi rate another quarter point to 3.50 per cent in December.---AFP