NEW YORK, Feb 3: The dollar benefited from healthy US job numbers on Friday that reinforced the Federal Reserve's appraisal of solid growth combined with quiescent inflation, traders said.

The euro had fallen under $1.30 to trade at 1.2963, against 1.3022 late Thursday in New York.

The dollar was trading at 121.07 yen, against 120.77 on Thursday. The Japanese currency has been in focus ahead of a Group of Seven (G7) meeting in Germany.

US employers added 111,000 jobs in January, according to the Labour Department's closely watched nonfarm payroll report. That was weaker than the 150,000 new jobs expected by Wall Street analysts.But the agency revised upward its estimates for job creation in December to 206,000 from 167,000, and to 196,000 in November from 154,000.

The unemployment rate climbed to 4.6 per cent from 4.5 per cent in December, while average hourly wages, a key gauge of inflation, rose 0.2 per cent in January to $17.09.

Immediately after the announcement, the euro shot up to a four-week high of $1.3064, while the pound briefly touched a nine-day high of $1.9748.

But the US currency soon recovered much of those losses, as the headline readings were offset by the substantial revisions to back data.

For the short-term traders looking for immediate gratification, the (payrolls) number was disappointing when set up next to the 150,000 print expected, John Kicklighter of Forex Capital Markets said.

Alternatively, economists and position traders saw the number as proof positive that the stabilization the Fed has linked between employment and economic growth is genuine, he said.

For both parties though, the upward revision to a five-month high 206,000 new hires was a considerable surprise and likely the shining statistic from the whole gauge. Russell Bloom at Thomson IFR Markets agreed. The upward revision in December jobs was a bright spot in the data and some dollar bulls are taking heart, he said.

Beata Caranci, senior economist at TD Bank Financial Group, said the report was what Federal Reserve policymakers were looking for because it signals employment and income growth with little inflation pressure.

This is one of the best outcomes the Fed could have expected, she said.

There's not any threat of wage-push inflation but still a significant number of people employed.”On Wednesday, the Federal Reserve said US economic momentum was picking up while inflation pressures were easing. The central bank left its base rate at 5.25 per cent.

One concern for the Fed, which has retained a warning on inflation and potential rate hike, is whether a tight labour market will lead to wage-driven inflation.

But the Fed was also watching for signs of economic weakness as a result of deep slump in housing last year, leaving some to expect a rate cut sometime in 2007. Lower borrowing costs would diminish the dollar's appeal for investors.

In other trading, the pound bought $1.9664 at 2000 GMT, little changed from 1.9668 late Thursday.

The dollar stood at 1.2475 Swiss francs (1.2433).

Traders said the yen was likely to come back in focus as currency players look ahead to the meeting of G7 finance ministers at the end of next week.

US Treasury Secretary Henry Paulson said Wednesday he was watching the yen's slumping value “very, very closely,” when asked by senators whether Tokyo was depressing its currency's value to gain an unfair trading edge.

His remarks came after European officials said they wanted the G7 to debate the yen's weakness, which has defied an economic recovery in Japan.

Still this is not a summit meeting, and therefore we do not expect the release of a significant communique, Scotia Bank currency analysts said of the G7 talks. —AFP