A surprisingly strong U.S. jobs report lifted the dollar to a five-and-a-half year high against a basket of currencies on Friday, while stocks climbed, led by financial shares.

Investors priced in a U.S. interest rate hike by mid-2015 and U.S. Treasuries prices dropped following the Labor Department data, which showed U.S. employers hired more workers in November than during any month in nearly three years.

Non-farm payrolls surged by 321,000 last month, the most since January of 2012, according to the report. Forecasts were for 230,000 new jobs. The unemployment rate held at a six-year low of 5.8 percent.

"It is unequivocally bullish on the U.S. economy," said Anthony Valeri, fixed-income strategist at LPL Financial in San Diego. "We'll need more evidence but it definitely contradicts the low-yield environment we have been in."

U.S. short-term interest-rate futures contracts dropped as traders bet the Federal Reserve would raise interest rates in July 2015 - earlier than formerly thought. The robust report caused the yield on U.S. 2-year Treasuries US2YT=RR to rise nearly 9 basis points to the highest since May 2011, according to Reuters data.

The benchmark 10-year U.S. Treasury US10YT=RR note was down 16/32, the yield at 2.3136 percent.

The dollar rose against a basket of currencies .DXY to its highest level since March 2009. It also gained against the yen JPY= to its highest since late July 2007.

On Wall Street, the Dow Jones industrial average .DJI was up 60.56 points, or 0.34 percent, at 17,960.66. The Standard & Poor's 500 Index .SPX was up 3.75 points, or 0.18 percent, at 2,075.67. The Nasdaq Composite Index .IXIC was up 14.99 points, or 0.31 percent, at 4,784.42.

Traders were balancing the encouraging fundamental strength in the U.S. economy with the prospect of a rate rise.

Financial shares led gains, with the S&P financial index .SPSY up 1 percent.

MSCI's global share index .MIWD00000PUS was flat, while an index of European shares.FTEU3 was up 1.6 percent, as the weaker euro lifted exporters.

The rally follows heavy declines on Thursday after the European Central Bank said a decision about further stimulus would be made next year.

Gold XAU= dropped nearly 1 percent, suffering from dollar strength, while Brent LCOc1 and U.S. crude CLc1 continued their slide.

Spot gold XAU= was at $1,194.90 an ounce. Brent crude was down $1.15 at $68.49 a barrel, while U.S. crude oil futures CLc1 were down $1.42 at $65.39.