* U.S. economy adds 162,000 jobs in March, boost dollar
* Private sector hiring rises to highest since May 2007
* Dollar hits fresh 7-month high vs yen
* Dollar/yen on pace for best weekly gain in 4 months
(Updates prices, adds comment, details)
By Gertrude Chavez-Dreyfuss
NEW YORK, April 2 (Reuters) - The dollar firmed broadly, hitting a
fresh 7-month high against the yen on Friday, after government data showed
the U.S. economy created private sector jobs that were the highest in
almost three years.
The report suggests the U.S. labor sector is on a gradual but steady
recovery and should affirm expectations that the Federal Reserve would hike
interest rates ahead of the European Central Bank, Bank of England and Bank
of Japan.
"To the extent that the jobs data reflects continued improvement in the
U.S. labor market it fits into our general view that the output gap in the
U.S. is closing, albeit slowly," said Marc Chandler, global head of FX
strategy at Brown Brothers Harriman in New York.
"This will allow the Fed to raise interest rates before the BoJ, ECB,
and BoE. We expect this to underpin the dollar on a medium-term
perspective," he said.
The Labor department reported that 162,000 new jobs were added to the
U.S. economy, lower than market forecasts for a 190,000 gain, but private
sector jobs rose to 123,000 to mark the largest since May 2007.
For the report, click on [].
In midday trading, the euro <EUR=> fell 0.7 percent against the dollar
to $1.3481. Traders said global macro hedge funds had sold euros following
the jobs data.
Despite the euro's weakness on Friday, the single euro zone currency
was still up slightly on the week versus the dollar, recovering modestly
from losses the last two weeks.
Against the yen, the dollar rose as high as 94.69 yen, the loftiest
since late August, according to Reuters data. It was last at 94.65 yen
<JPY=>, up 0.9 percent on the day.
Dealers said there are options-related barriers near 95 yen, which have
hindered the dollar/yen's pair upside momentum.
The greenback was up 2.3 percent against the yen this week, on track
for it's best weekly performance since early December.
Sterling dropped 0.7 percent to $1.5190 <GBP=>.
The ICE Futures' dollar index <.DXY>, a measure of the greenback's
value against six major currencies, rose 0.6 percent to 81.306.
Some currency analysts believe that given the generally upbeat non-farm
payrolls data, the Fed may raise the discount rate again on Monday when it
holds a meeting. The discount rate is that which the Fed charges commercial
banks and other depositary institutions on loans.
"Given that the central bank has already ended their asset purchase
program, another discount rate hike would be the next logical step," said
Kathy Lien, director of FX research at GFT in New York. "Raising the
discount rate would help the Fed normalize monetary policy without
affecting households."
(Editing by John Picinich)
