NEW YORK - The dollar weakened on Friday after data in the U.S. unemployment report for February showed inflation pressures were easing, leading yields on Treasuries to decline and denting some of the U.S. currency's recent strength.

Average hourly earnings for all private workers rose 0.2% versus 0.3% in January, and lifted the year-on-year figure to 4.6%. Economists expected hourly earnings to rise 0.3% in February, which would have raised wages by 4.7% annually.

"It’s suggesting wage pressures are not accelerating," said Andrzej Skiba, head of the BlueBay U.S. Fixed Income team at RBC Global Asset Management.

"That was a major concern for the market that the strength of the labor markets would lead to meaningful pressure on wage inflation, preventing overall inflation numbers from moderating," he said.

The dollar index fell 0.475%, while the euro was up 0.51% to $1.0634. Sterling was last trading at $1.2037, up 0.94% on the day.

The Japanese yen strengthened 0.07% to 136.06 per dollar.

The U.S. economy added jobs at a solid clip last month, likely ensuring that the Fed will raise rates for longer, as expected. But the cooling of wage inflation lowered the probability of a 50 basis point rate hike in March.

Futures for fed funds showed a 38.4% chance of a 50 bps hike on March 22, a sharp decline from earlier in the week.

Nonfarm payrolls increased by 311,000 jobs last month, the Labor Department's closely watched employment report showed on Friday. Data for January was revised lower to show 504,000 jobs added instead of the previously reported 517,000.

Economists polled by Reuters had forecast job growth of 205,000. They say the economy needs to create 100,000 jobs per month to keep up with growth in the working-age population.

(Reporting by Herbert Lash; Editing by Emelia Sithole-Matarise)