The dollar gained against its chief rivals Friday as traders read a stronger-than-expected U.S. payrolls report as keeping pressure on the Federal Reserve to make further increases in interest rates. Higher rates make the dollar more attractive on a yield basis relative to the currencies of the other industrialized nations. The dollar was quoted at 111.86 yen compared to 111.62 before the report. The dollar thus traded up 0.6% on its Japanese counterpart from late Thursday. The euro was changing hands lately at $1.2341 compared to $1.2386. The euro-zone common currency is down 0.4% from Thursday. "As far as we stand, there is nothing stopping the Fed," said Kathy Lien, senior currency analyst at Forex Capital Markets. Fed policymakers will meet to review monetary policy next Tuesday, and a further tightening is broadly anticipated by the market. "A quarter-point hike to 3.5% has already been priced into the market. Today's blockbuster report makes 4% almost a certainty with the Fed possibly even overshooting to 4.25%," she said. "However, the dollar rally may be short-lived," Lien pointed out. "With oil prices solidly above $60 a barrel, the Fed may also upgrade the risks for inflation." The yen had already surrendered ground to the dollar earlier Friday amid mounting political uncertainty concerning the future for Prime Minister Junichiro Koizumi and his reform program. A Kyodo News report said investors were increasingly jittery about the House of Councilors' vote on postal-privatization bills expected to be held Monday, after being pushed back from Friday. Koizumi has suggested he will call a snap election if the upper house of Japan's parliament rejects the bills, the centerpiece of his reform polices. Japan Post, to be privatized by 2007 under the proposed bills, is in effect the world's largest bank, holding 330 trillion yen ($2.9 trillion) in savings and insurance deposits. "Should the legislation fail and Koizumi call an election, markets could punish the yen on the basis of [viewing it as] an interruption of Koizumi's market reforms," said Ashraf Laidi, senior currency analyst with MG Financial Group.