A surging British pound dominated foreign exchange trade Friday as dealers scrambled to buy sterling on word it would be formally linked to other major European currencies.

The dollar rose against its major foreign counterparts except the pound and the Japanese yen, rebounding from a selloff Thursday incited by expectations of lower U.S. interest rates.The dollar buying came mostly as a byproduct of cross trading between sterling and the German mark.

Gold prices gained modestly in domestic trading but moved mostly lower overseas.

Market participants in the United States said the dollar began on a weak note due to news of another deterioration in the country's job market.

The Labor Department reported an increase in the unemployment rate for the third straight month and a decline in nonfarm payrolls.

The jobless rate rose to 5.7 percent in September from August's 5.6 percent.

The House's rejection of a $500 billion deficit-cutting compromise also was a negative for the dollar because it cast doubt on the government's ability to solve the chronic deficit problem.