NEW YORK (CNN/Money) - The dollar hit a one-week high against the euro Monday and also rose against the Japanese yen after last week's surprisingly strong U.S. jobs report fanned expectations that interest rates may rise soon.

The euro bought $1.2066, down from $1.2132 late last week. The dollar bought ¥104.69, up from ¥104.59 late Friday.

Elsewhere, U.S. Treasury pricestumbled again, pushing yields to three month highs, after a strong report from the services sector.

Non-farm payrolls climbed 308,000 in March, the biggest gain since April 2000 and topping the most bullish forecast.

Analysts see labor market improvement key to the Federal Reserve raising interest rates from a 1958 low of one percent and increasing the allure of dollar-denominated assets to foreign investors.

YOUR E-MAIL ALERTS Bonds Interest Rates Federal Reserve or Create your own Manage alerts | What is this?

"The payrolls data resolves the big puzzle and the big worry over the U.S. outlook. It means the Fed can now consider raising rates at some stage," Aziz McMahon, currency strategist at ABN AMRO, told Reuters.

A Reuters survey of economists at 22 U.S. primary dealers after the payrolls report found only one brought forward a forecast for a rise in U.S. interest rates, to June from August.

Economists remain almost evenly divided over whether the Fed will raise rates this year or wait till 2005.

However, interest rate futures, which often move more aggressively than economists adjust forecasts, discounted a higher risk of rate rises by September and even June in the wake of Friday's jobs data.

"People are reassessing the U.S. economic outlook because they had thought the recovery was jobless. People are beginning to price in the chance of a rate hike by August," Niels Christensen, senior currency strategist at Societe Generale in Paris, told Reuters.

U.S. Treasurys added to Friday's decline following the strong payroll report, as a report showing growth in the services sector came in well above expectations.

The benchmark 10-year note fell 15/32 to 98-11/32 to yield 4.20 percent, up from 4.12 percent late last week, and the 30-year bond fell 5/8 of a point to 105-5/32 to yield 5.01 percent, up from 4.97 late Friday.

The two-year note fell 3/16 of a point to 99-6/32 to yield 1.89 percent and the five-year note shed 9/32 to 97-12/32 to yield 3.19 percent.

The Institute for Supply Management's non-manufacturing index surged to 65.8 in March from 60.8 in February. Wall Street economists had forecast a rise to 61.5. A number above 50 indicates growth.

The survey's employment index rose in March to 53.9 from 52.7 in February. Growth in demand for new orders rose to 62.8 in March from 60.3 in February.