NEW YORK (Bloomberg) — The dollar strengthened against most of its major counterparts and climbed to a seven-month high versus the yen on speculation gains in the labour market will help sustain the U.S.'s economic recovery.

The greenback rose against 13 of the 16 most-traded currencies as the Labor Department said employers added 162,000 jobs last month. Canada's dollar approached parity as the report fuelled optimism that consumer demand in the US, the nation's largest trading partner, will help boost exports.

"It's a dollar move," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York. "The dollar is cheap because it's trading below fair-value models. And what does that mean? It means that US labour costs are relatively cheaper compared to Europe, or maybe Japan, or the U.K. or Switzerland. And over time that affects business decisions."

The dollar advanced 0.8 percent to 94.54 yen at 12:32 p.m. in New York, from 93.82 yen yesterday. It touched 94.69, the highest level since Aug. 24, and posted a weekly gain of 2.2 percent. The U.S. currency appreciated 0.8 percent to $1.3486 per euro, from $1.3589. It fell 0.6 percent on the week. The yen was little changed at 127.46 versus the 16-nation currency, compared with 127.50 yesterday.

The gain in employment, the biggest since a 239,000-job increase in March 2007, followed a revised reduction of 14,000 in February, a slower rate of job cuts than the government's previous estimate of a decline of 36,000. The median forecast of 83 economists in a Bloomberg survey was for an increase of 184,000 jobs. The unemployment rate held steady at 9.7 percent.

Treasury Secretary Timothy F. Geithner said the payrolls report shows the U.S. economy is "getting stronger." Business investment is expanding and exports are "coming back," he said in an interview on Bloomberg Television.

Financial markets in the U.S., U.K., Australia and Hong Kong are closed today for the Good Friday holiday. Trading in U.S. Treasuries ends at noon New York time.

Futures on the CME Group Inc. exchange showed a 60 percent chance the Fed will raise the target rate for overnight lending between banks by at least a quarter-percentage point by November, up from 45 percent odds a month ago. The rate has been a range of zero to 0.25 percent since December 2008, and policymakers reiterated on March 16 it would remain low for an "extended" period.

The greenback climbed for a fourth straight day against the yen, its longest rally since the five trading sessions ended Feb. 18, according to data compiled by Bloomberg.

"Japan's economy is recovering, but it's still not strong enough," said Amelia Bourdeau, a currency strategist at UBS AG in Stamford, Connecticut, who predicts a dollar rally to 95 yen in the next three months.

U.S. manufacturing expanded last month at the fastest pace since July 2004, the Institute for Supply Management's factory index showed yesterday. It increased to 59.6, indicating quicker growth than February's 56.5 reading. Other data showed China's manufacturing grew at a faster pace and confidence among Japan's largest manufacturers rose for a fourth straight quarter.

"As the U.S. economic outlook picks up, expectations for a rate increase by the Fed should rise," said Susumu Kato, chief economist in Tokyo at Credit Agricole CIB and CLSA.