By 2200 GMT, the euro had fallen under 1.30 dollars 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 Labor 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 percent from 4.5 percent in December, while average hourly wages, a key gauge of inflation, rose 0.2 percent in January to 17.09 dollars.

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

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 percent.

One concern for the Fed, which has retained a warning on inflation and potential rate hike, is whether a tight labor 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.