LONDON, Dec 2: The dollar rose slightly against the euro on Friday but markets showed little reaction to the release of employment data showing that the US economy had created 215,000 jobs in November, dealers said.

The US unit held above 120 yen after clearing the key hurdle for the first time in over two years on Thursday on prospects of higher US borrowing costs.

The euro fell to 1.1705 dollars in late European trading, from 1.1734 dollars late on Thursday in New York.

The dollar gained to 120.77 yen from 120.62 yen on Thursday.

Meanwhile, the price of gold renewed its march and closed above 500 dollars per ounce.

It had breached the landmark on Tuesday for the first time in 18 years on strong buying by investment funds amid higher inflation in the United States.

The dollar strengthened slightly in early European trading but was unable to progress further after the release of the US jobs report.

Analysts said this was because the figure was in line with expectations and optimism was tempered by a downward revision to the jobs figure for October, which was reduced to 44,000 jobs from the initially forecast 56,000.

Over the past year, the euro has shed around 10 per cent of its value against the dollar, following a three-year upturn, owing to a growing focus on interest rate developments, particularly between the eurozone and the United States.

The US Federal Reserve raised its benchmark rate a quarter-point for the 12th consecutive time last month to four per cent, with the market confident that at least two more hikes are in the pipeline.

In the eurozone, rates are currently 2.25 per cent after a hike of 25 basis points by the European Central Bank on Thursday.

An economist at The Bank of Tokyo-Mitsubishi, Paul Chertkow, said: “The implication is that interest rate differentials between the US and the eurozone will continue to widen, supporting further appreciation of the dollar against the euro.”

The European Central Bank said on Thursday it had decided to raise rates, but ECB President Jean-Claude Trichet sought to cool speculation that the rate hike was part of a series of tightening actions.

Markets were also expected to keep a close eye on proceedings at a two-day Group of Seven meeting in London where finance ministers and central bankers were to convene on Friday evening.

The special event, which has been organised to bid farewell to outgoing US Federal Reserve chairman Alan Greenspan, is also to serve as a forum for more discussions on stalled global trade talks ahead of a meeting of the World Trade Organisation in Hong Kong later this month.

The yen fell to its lowest level since March 2003 as rumours circulated that the China was preparing to revalue the yuan.

A report by German business weekly WirtschaftsWoche, citing government sources, said that China was planning to revalue the yuan against the dollar by 7.2 per cent with effect from January 1, 2006.

The euro was changing hands at 1.1705 dollars against 1.1734 late on Thursday in New York, 141.28 yen (141.56), 0.6761 pounds (0.6779) and 1.5447 Swiss francs (1.5464).

The dollar stood at 120.77 yen (120.62) and 1.3198 Swiss francs (1.3173).—AFP