NEW YORK (AFP) - The dollar rose sharply Thursday after a US labor market report that was not as bad as feared and indications that a European Central Bank rate hike may be the last for some time.

The euro weakened to 1.5691 dollars at 2000 GMT from 1.5876 late Wednesday.

The greenback was meanwhile trading at 106.81 yen, up from 105.84 on Wednesday.

The ECB bank met expectations as it raised eurozone lending rates a quarter point to 4.25 percent to dampen inflation. But ECB chief Jean-Claude Trichet signaled the bank had not embarked on a series of hikes.

Trichet told a news conference the bank's monetary policy "will contribute to achieving our objective" of price stability, a code phrase that suggested more increases were not immediately at hand.

"The bank seems now in a wait-and-see mood," commented BNP Paribas economist Clemente De Lucia

Howard Archer of Global Insight added: "There was no reference to the ECB being in a 'state of heightened alertness' or 'strong vigilance,' thereby suggesting that no further interest rate hikes are currently planned in the near term at the very least."

The prospect of a series of rate hikes would have made the euro more attractive to investors and would have driven up its value against the dollar.

In the US meanwhile, the government reported a loss of 62,000 jobs in June, roughly in line with expectations and well below the figure of 100,000 that some had feared.

"Anything short of 100,000 (job losses) would have been dollar positive and that is exactly how the market reacted today," said Kathy Lien at Forex Capital Markets.

The data suggested the US economy is weak but not in a disastrous situation that would force the Federal Reserve to cut its base rate, already at a low 2.0 percent.

Some say the Fed is on track to boost rates later this year to keep inflation in check in anticipation of an economic recovery.

"Today's drop in jobs will not hold (Fed official) back from raising interest rates in the third or fourth quarter," Lien said.

In late New York trade, the dollar stood at 1.0271 Swiss francs from 1.0141.

The pound fell to 1.9811 dollars after 1.9925.

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