* Dollar rises sharply vs yen, euro on surprise jobs data
* U.S. loses far fewer than expected 11,000 jobs in Nov
* China says dollar still at heart of its FX reserves
(Updates prices, adds quote, data changes byline, dateline)
By Steven C. Johnson
NEW YORK, Dec 4 (Reuters) - The dollar soared against the yen on Friday and also rose on 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.
The dollar approached 90 yen for the first time in three weeks and was on track for its best day since August, while the euro fell below $1.50.
Markets had expected job losses of 130,000, and if the numbers continue to improve, analysts said the Federal Reserve may have to start thinking about raising interest rates from their current record lows.
"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, and that's pushed the dollar higher," said Fabian Eliasson, vice president of FX sales at Mizuho Corporate bank in New York.
"It almost seems too good to be true, though. We even thought it was a misprint at first, so I want to see more follow-through. But if this continues, you may start to see the dollar rally on strong data rather than the opposite."
The dollar was last up 1.6 percent at 89.60 yen
Recently, expectations that U.S. interest rates will stay ultra-low for some time have encouraged investors to use the dollar as a funding currency to buy riskier, higher-yielding currencies. The Fed has signaled intentions to keep U.S. rates low well into 2010.
Last week, the dollar hit a 14-year low at 84.82 yen but the Japanese currency has fallen steadily since the Bank of Japan on Tuesday announced extra liquidity-boosting steps to fight deflation.
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 0.7 percent at C$1.0472
China said earlier on 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 immediate reaction on currency markets to the statement from China's State Administration of Foreign Exchange on the country's reserves.
(Additional reporting by Jamie McGeever in London; Editing by Chizu Nomiyama )
((steven.c.johnson@reuters.com; +1 646 223 6346; Reuters Messaging: steven.c.johnson.reuters.com@reuters.net))