By Polya Lesova, MarketWatch FRANKFURT (MarketWatch) -- The dollar rose against the Japanese yen and its other major rivals on Friday after U.S. labor market data delivered a positive surprise, showing that the economy shed only 11,000 jobs last month. The euro fell 0.7% to $1.4949, falling below the key $1.50 level. The dollar index (DXY 75.17, +0.54, +0.72%) , which measures the performance of the dollar against a trade-weighted basket of six major currencies, surged 0.8% to 75.202 in recent trading. It stood at 74.660 before the data and at 74.619 in late North American trading Thursday. "The dollar rallied on the much better-than-expected employment report outcome," said analysts at Action Economics. "It has been a while since we have seen a reaction of higher stocks, higher dollar, and higher Treasury yields in response to better economic data, which may be indicative of the market actually looking at fundamentals," they said. Stocks on Wall Street posted strong gains, while U.S. Treasury bonds fell sharply, sending yields higher. "Of particular interest is the dramatic sell-off in Fed funds futures, as the market reassesses the trajectory of Fed policy in light of evidence of light at the end of the tunnel of long and deep job losses," said Marc Chandler, currency strategist at Brown Brothers Harriman & Co. The market still does not expect the Federal Reserve to raise interest rates in the first quarter next year, but a hike in the second quarter is not being ruled out, he said in a note to clients. "The dollar's weakness is largely cyclical in nature, rather than structural," Chandler said. "The key cyclical driver was the extraordinarily aggressive monetary policy and the ample dollar liquidity. When these are normalized, we expect the dollar to find great traction." The Labor Department reported that the U.S. labor market improved markedly in November, with the unemployment rate falling back to 10% and job losses shrinking to the lowest level in nearly two years. Nonfarm payrolls dropped by a seasonally adjusted 11,000 in November, the fewest since December 2007. Payroll losses in September and October were revised lower by a total of 159,000. The report was much better than expected by economists surveyed by MarketWatch, who were looking for 100,000 fewer jobs and a steady 10.2% unemployment rate. "The dual improvement in unemployment and payrolls is exactly what the doctor must order for the consumer-led U.S. economy in order for the Federal Reserve to take any meaningful steps into an exit strategy," said Ashraf Laidi, chief market strategist at CMC Markets, in a note to clients. Following the report, the dollar surged 1.4% against the Japanese yen to 89.60 yen after trading flat earlier in the session. The euro fell to an intraday low of $1.4911, breaking below the closely watched $1.50 level. It was earlier trading slightly higher against the greenback. The British pound pared its gains against the greenback. It last traded up 0.4% to $1.6594. The Canadian dollar rose 0.8% against its U.S. counterpart on Friday after data showed that Canada's employment rose by 79,000 jobs in November, bringing the unemployment rate down 0.1 percentage points to 8.5%.

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