(Updates prices, adds analyst quote in paragraph 6, adds
paragraph 12 on Fitch keeping U.S. credit rating on negative
watch)

By Hannah Lang
       WASHINGTON, June 2 (Reuters) - The U.S. dollar rose on
Friday after May's non-farm payrolls report showed employment
numbers surged, while traders weighed the merits of the U.S.
Federal Reserve possibly skipping a rate hike in June.
    The report showed that payrolls in the public and private
sector increased by 339,000 in May, far outstripping the 190,000
forecast on average by economists polled by Reuters. May's jump
followed a 253,000 rise in April.
    Despite strong hiring, the unemployment rate rose to 3.7%
from a 53-year low of 3.4% in April.
    The dollar index, which measures the U.S. currency
against six others, was last up 0.435% at 103.980, on track for
its largest daily percentage gain since mid-May. On the week,
however, the dollar slipped 0.2%, its biggest weekly decline
since early May.
    The dollar index slid 0.62% on Thursday, its worst day in
almost a month, after Fed officials signaled the central bank
will forgo an interest rate hike this month.
    "The Fed has painted themselves into a corner with these
most recent statements about the need to take a pause, and then
maybe look to hike in July, and I think they're going to regret
it after today's non-farm payroll number," said Paresh
Upadhyaya, director of fixed income and currency strategy at
Amundi US. 
    Money markets are pricing in a roughly 29% chance of a June
hike, down from near 70% earlier in the week.
    Philadelphia Fed President Patrick Harker said on Thursday
it was "time to at least hit the stop button for one meeting and
see how it goes."
    A day earlier, Fed Governor Philip Jefferson said skipping a
rate hike "would allow the committee to see more data before
making decisions about the extent of additional policy firming."
    "The challenge is that we've entered the Fed's blackout
period ahead of the (Federal Open Market Committee) meeting,
which means it's going to be hard to see a pushback from
officials or any guidance from officials after this employment
report," said Marc Chandler, chief market strategist at
Bannockburn Global Forex.

    
    The U.S. Senate's passage of a bill Thursday night to
suspend the debt ceiling and avert a disastrous default removed
a pillar of support for the dollar, which had paradoxically been
a key beneficiary of the uncertainty because of its safe-haven
status.
    On Friday, Fitch Ratings said the United States' "AAA"
credit rating will remain on negative watch, despite the debt
limit agreement, citing repeated political standoffs and
last-minute suspensions of the ceiling before the deadline. 
    The dollar climbed 0.8% against the yen this week, on track
for its largest weekly percentage rise since mid-May.
    Sterling rose 0.8% against the dollar, on pace for the
biggest weekly gain since late April.
    The euro was last down 0.45% to $1.07135, off its
highest in around a week after a boost on Thursday from European
Central Bank President Christine Lagarde, who said further
policy tightening was necessary.
    The Australian dollar surged after Australia's
independent wage-setting body announced that it would raise the
minimum wage by 5.75% from July 1. The Aussie rose by as much as
0.93% to $0.663, its strongest since May 24, and was last up
0.59% versus the greenback at $0.661.
========================================================
    Currency bid prices at 3:03PM (1903 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change                   
                                              Session                                             
 Dollar index                 103.9800       103.5400    +0.44%         0.473%        +104.0800   +103.3800
 Euro/Dollar                  $1.0713        $1.0762     -0.45%         -0.01%        +$1.0779    +$1.0706
 Dollar/Yen                   139.9100       138.8150    +0.79%         +6.72%        +140.0650   +138.6000
 Euro/Yen                     149.88         149.36      +0.35%         +6.83%        +149.9600   +149.2600
 Dollar/Swiss                 0.9087         0.9055      +0.34%         -1.74%        +0.9090     +0.9037
 Sterling/Dollar              $1.2454        $1.2526     -0.57%         +2.99%        +$1.2544    +$1.2442
 Dollar/Canadian              1.3429         1.3449      -0.14%         -0.88%        +1.3451     +1.3408
 Aussie/Dollar                $0.6612        $0.6573     +0.60%         -2.99%        +$0.6638    +$0.6572
 Euro/Swiss                   0.9735         0.9743      -0.08%         -1.62%        +0.9760     +0.9729
 Euro/Sterling                0.8601         0.8592      +0.10%         -2.75%        +0.8605     +0.8579
 NZ                           $0.6064        $0.6070     -0.09%         -4.49%        +$0.6111    +$0.6059
 Dollar/Dollar                                                                                    
 Dollar/Norway                11.0210        11.0480     -0.20%         +12.35%       +11.0620    +10.9640
 Euro/Norway                  11.8048        11.8970     -0.77%         +12.49%       +11.9295    +11.8038
 Dollar/Sweden                10.8000        10.8021     -0.54%         +3.77%        +10.8170    +10.6850
 Euro/Sweden                  11.5664        11.6296     -0.54%         +3.74%        +11.6364    +11.5097
 
    
 (Reporting by Hannah Lang in Washington; Additional reporting
by Amanda Cooper and Dhara Ranasinghe in London and Kevin
Buckland in Tokyo
Editing by Mark Heinrich, Mark Potter, Andrew Heavens, Emelia
Sithole-Matarise and Sriraj Kalluvila)