FOREX-Dollar jumps on strong U.S. jobs report

* Dollar up sharply against yen, euro

* U.S. jobs gains of 288,000 smartly top forecasts

* British pound backs away from near 5-year peak

(Adds dollar gains, comments; changes byline, dateline;

previous LONDON)

By Michael Connor

NEW YORK (Frankfurt: HX6.F - news) , May 2 (Reuters) - The dollar shot up on Friday,

rising against the yen, euro and other major currencies on

buying driven by surprisingly strong hiring in April that took

America's unemployment rate to a 5-1/2-year low.

Government data, including a nonfarm payrolls surge of

288,000 far above Wall Street forecasts of 210,000, bolstered

optimism about the U.S. economy and suggested a possible rebound

in second-quarter economic activity.

April's U.S. jobless rate was 6.3 percent, down 0.4 of a

percentage point, and the lowest since September 2008.

"This keeps the Fed on track for tapering and for the first

interest rate hikes in 2015," said Anthony Valeri, investment

strategist at LPL Financial (NasdaqGS: LPLA - news) in San Diego.

The labor reports did include a worrisome decline in the

labor force participation rate but overall pointed to economic

expansion suggested by other recent upbeat data, Valeri and

other strategists said.

"People will take it as support, along with the housing

numbers, that the U.S. economy is back on track," said Shaun

Osborne, currency strategist at TD Securities in Toronto. "This

should set up the dollar for gains for the rest of today's

session."

The dollar index, a composite of six currency pairs,

was up a touch just before the U.S. labor reports but jumped

more than 25 basis points quickly and was up 0.38 percent at

79.827 in mid-morning New York trade.

On Thursday, the index fell to 79.414, its lowest since

April 11, partly on anxieties that Friday's jobs report might

fall short of expectations and discourage buying of greenbacks.

The dollar rose 0.45 percent against the yen to 102.79 yen

.

The euro was down 0.38 percent against the dollar at

$1.3815.

British sterling, which hit a near five-year high of $1.6921

on Thursday, was down 0.38 percent against the dollar at $1.6830

.

Major currencies showed limited reaction to latest

developments in Ukraine, where government forces launched an

operation to retake Slaviansk, pro-Russian separatists holding

the town in eastern Ukraine said on Friday.

(Editing by Nick Zieminski)