* Dollar soars vs yen, euro on surprise jobs data
* U.S. job loses in Nov of 11,000 far fewer than expected
* Classic "Buy North America" day
* Talk of renewed yen carry trade emerging
* China says dollar still at heart of its FX reserves (Updates prices, adds quotes, detail on jobs data)
By Steven C. Johnson
NEW YORK, Dec 4 (Reuters) - The dollar soared against the yen on Friday and rose against the euro after data showed the United States shed a far fewer-than-expected 11,000 jobs last month, boosting hopes that recovery is picking up steam.
Markets had expected job losses of 130,000 in November, and the surprisingly strong report fed speculation that the Federal Reserve may soon have to consider raising interest rates from record lows near zero.
The dollar approached 90 yen for the first time in three weeks and was on track for its best day against the Japanese currency since August, while the euro fell below $1.50.
"A jobs recovery is the last piece of the puzzle before we can say we're in full recovery, so it raises the question that maybe rates will go up sooner rather than later. That's pushed the dollar higher," said Fabian Eliasson, vice president of FX sales at Mizuho Corporate bank in New York.
But after four straight quarters of economic decline and more than 7 million jobs lost since December 2007, Eliasson said the data "almost seems to good to be true." The jobless rate also retreated slightly from a 26-1/2-year high.
"We even thought it was a misprint at first," Eliasson said, "so I want to see more follow-through."
The dollar was last up 1.6 percent at 89.60 yen and the euro was down 0.9 percent at $1.4939 after falling as far as $1.4913. Earlier it hit a session peak of $1.5091.
Last week, the dollar hit a 14-year low at 84.82 yen but the Japanese currency has fallen steadily since the the Bank of Japan on Tuesday announced extra liquidity-boosting steps to fight deflation.
SELL YEN, BUY NORTH AMERICA
Expectations that U.S. rates will stay low indefinitely have prompted investors to use the dollar as a funding currency to buy riskier, higher-yielding assets, even on strong U.S. data. The Fed has said U.S. rates will stay low into 2010.
"But if (signs of a job recovery) continue, you may start to see the dollar rally on strong data rather than the opposite," Mizuho's Eliasson said.
In fact, some analysts said the yen may be replacing the dollar as the favored funding, or "carry trade," currency
"The market has brought forward anticipated fed rate hikes, but Japan offers a stark contrast," said Brown Brothers Harriman strategist Marc Chandler, pointing to the BoJ's move to ease monetary conditions this week by offering banks 10 trillion in yen in short-term funds
Alan Ruskin, chief international strategist at RBS Securities in Greenwich, Connecticut, said the uniformly strong U.S. data Friday amounts to a classic "buy North America" day on currency markets.
The Mexican peso was a big gainer on Friday, with the greenback slipping to a 13-month low beneath 12.50 pesos.
The Canadian dollar also rose after Canadian jobs figures for November showed that 79,000 jobs were created last month, more than five times the 15,000 forecast in a Reuters poll. The dollar was last down 0.5 percent at C$1.0495.
The data provides the first sign that the U.S. economy "is turning from a major drag for surrounding countries to something more positive," Ruskin said.
Canada and Mexico are heavily depend on U.S. trade links.
Elsewhere, China said Friday it would look to diversify its huge foreign exchange reserves across currencies and high quality assets, but the dollar would remain the anchor currency. There was little reaction on currency markets.
(Additional reporting by Jamie McGeever in London) (Editing by Theodore d'Afflisio) ((steven.c.johnson@reuters.com; +1 646 223 6346; Reuters Messaging: steven.c.johnson.reuters.com@reuters.net)) ((Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com))