NEW YORK (CNNMoney.com) - The dollar rallied against the euro and yen Friday after mixed economic reports reinforced expectations for further interest-rate hikes. Treasury prices rose slightly.

The euro bought $1.2026, down from $1.2098 late Thursday. The dollar bought ¥118.93, up from ¥118.50 in the previous session.

The Labor Department reported Friday that the unemployment rate fell to 4.7 percent in January, a 4 1/2-year low, from 4.9 percent in December. The unemployment rate was forecast to remain unchanged at 4.9 percent, according to Briefing.com.

The report was mixed, however, as the government reported that employers in the U.S. added a less-than-expected 193,000 new jobs.

A solid rebound was expected in the labor market in January following a disappointing December. Economists surveyed by Briefing.com forecast that employers added 250,000 jobs in January, up from a revised 140,000 in December.

In addition, the pace of growth in the service sector slowed more than expected in January, as employment and new orders dropped, according to the Institute for Supply Management's services index.

And consumer sentiment worsened in January as high oil prices and weaker economic growth in late 2005 offset robust stock market performance and a more positive jobs market, according to the University of Michigan's final January index of consumer sentiment.

"I think broadly the dollar will continue to trade off the positive sentiment from the employment report," Charmaine Buskas, foreign exchange analyst with Economy.com in West Chester, Pennsylvania, told Reuters. "The consumer sentiment and ISM data were disappointing, but the broad outlook remains generally positive for the dollar."

Continuing inflationary pressure may prompt the Federal Reserve to maintain its monetary tightening campaign when Chairman Ben Bernanke oversees his first Fed meeting in March.

Rising interest rates generally help the dollar as they make dollar-denominated securities more attractive to foreign investors.

In bond markets, the 10-year note rose 8/32 to 99-24/32 to yield 4.53 percent, down slightly from 4.56 late Thursday. The 30-year bond added a full point and 3/32 to 111, yielding 4.63 percent, down from 4.69 the previous session. Bond prices and yields move in opposite directions.

The two-year note rose one tick, yielding 4.58 percent. The five-year note was up two ticks, yielding 4.49 percent.

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