By James Ramage 

The dollar pushed to a new 11-year high against the euro and rose against the yen Friday after a strong U.S. jobs report solidified market expectations for the Federal Reserve to raise interest rates around midyear.

The euro fell to $1.0873, down 1.5% for the day and crossing below $1.09 for the first time since Sept. 4, 2003.

The dollar rose 0.7% against the Japanese currency to a three-month high of Yen120.96, approaching its strongest level since July 2007.

The U.S. economy added 295,000 jobs last month on a seasonally adjusted basis, the Labor Department said. Economists had predicted 240,000 jobs were created in February.

The unemployment rate ticked down to 5.5% from 5.7% in January, below expectations of 5.6%. Hourly earnings and wages, components of the jobs data the Fed has watched closely, saw modest increases in February.

The report's details gave investors renewed confidence that the Fed could raise interest rates as early as midyear, said Vassili Serebriakov, currency strategist at BNP Paribas.

"This is another strong report; the dollar is regaining momentum," Mr. Serebriakov said. "The unemployment rate is getting into a zone where it signals a future acceleration of wages, which is important for the Fed. This increases the risk for a June rate hike."

Fed funds futures, which investors use to bet on central-bank policy, showed Friday that investors and traders see a 47% likelihood of a rate increase in July, according to data from CME Group Inc. That compares with a 37% probability one day earlier.

The Federal Reserve has said it would consider raising interest rates when economic data, including employment and inflation, recover sufficiently from the financial crisis. Raising U.S. interest rates would lure investors to the dollar, as higher borrowing costs would increase returns on assets denominated in the currency.

The dollar has risen significantly against developed-market currencies since the summer as investors have moved into dollar-denominated assets in anticipation of higher interest rates. By comparison, central banks in the eurozone and Japan have been easing policy to ward off deflation and juice growth, weakening their respective currencies.

Friday's U.S. jobs data highlighted differences in monetary policy between the Fed and central banks across the globe, said Joe Manimbo, senior market analyst at Western Union.

"The divergence trade has kicked into a higher gear," Mr. Manimbo said.

Write to James Ramage at james.ramage@wsj.com