LONDON--The dollar was sharply lower Friday after a weak US jobs report stoked fears the US economic recovery is stalling, dealers said, with the euro benefitting after recent positive eurozone data.

They said the dollar was hit badly after the US economy shed 131,000 jobs in July, compared with market forecasts for 87,000.

Worse still, the government revised the June job loss figures to 221,000 rather than the 125,000 previously reported, and while the private sector generated 71,000 jobs in July, forecasts were for more than 80,000.

The dollar had been slightly firmer earlier in the day but stood little chance when the labour market report came through.

In late London trade, the euro was at 1.3283 dollars, up sharply from 1.3190 dollars in New York late Thursday but off three-month highs of 1.3334 dollars seen on the US data release.

Against the Japanese currency, the dollar tumbled to 85.25 yen, managing to come off a low of 85.02 yen, after 85.82 yen on Thursday.

Dealers said that after figures Thursday showing new claims for US jobless benefits rose unexpectedly last week to their highest since April, Friday's outcome was all the more damaging.

The dollar has been under pressure in recent weeks on fears that a slowing US recovery could prompt the US Federal Reserve to step up "quantitative easing" -- pumping money directly into the economy.

That course, however, comes with risks attached, especially of sparking inflation if too much money sloshes around the financial system chasing prices.

"The markets want to see some definitive signs of growth but all they are getting is more uncertainty and a sense that the US economy is beginning to stagnate," said Christina Weisz, analyst at Currency Solutions.

Paul Ashworth of Capital Economics said that "without more substantial job gains there is little chance that we will see any acceleration in consumption growth in the second half of the year to offset the fading fiscal stimulus and boost from inventory rebuilding".

In late trade, the euro changed hands at 1.3283 dollars against 1.3190 dollars on Thursday, at 113.25 yen (113.22), 0.8312 pounds (0.8298) and 1.3768 Swiss francs (1.3795).

The dollar stood at 85.25 yen (85.82) and 1.0365 Swiss francs (1.0453).

The pound was at 1.5980 dollars (1.5893).

On the London Bullion Market, the price of gold climbed to 1,207.75 dollars an ounce from 1,192.50 dollars an ounce on Thursday.