* Dollar ends mostly flat after payrolls-related spike
* U.S. jobs gains of 288,000 smartly top forecasts
* Jobs gains offset by flat wages, other data shortfalls
(Adds dollar's fizzle, comments and latest prices) NEW YORK, May 2 (Reuters) - Currency traders briefly boosted the dollar on Friday on news of surprisingly strong hiring that took the U.S. unemployment rate in April to a 5-1/2-year low before surrendering the gains on data signalling many Americans were exiting the labor force. The dollar index, a composite of six currency pairs, was down 0.01 percent in late New York trade after rising about 0.40 percent on U.S. labor reports showing a big drop in the jobless rate. The dollar rose sharply against the yen after the jobs data to as high as 103.02 yen but dropped back to a nearly flat 102.23 yen late on Friday. The euro was initially down 0.38 percent or more against the dollar but was up a touch in late trading at $1.3874. April's U.S. jobless rate was 6.3 percent, down 0.4 of a percentage point, and the lowest since September 2008. But the monthly jobs reports also showed a drop in the labor participation rate, a reflection of increasing numbers of Americans ending job hunting, and flat wage increases. "Initially, it looked to people that the Federal Reserve might speed up the normalization of interest rates but as they looked at details (of the labor reports) they changed their minds," said Joseph Trevisani, chief market strategist at WorldWideMarkets Online in Woodcliff Lake, New Jersey. The dollar will face headwinds in currency markets until the Fed clearly adopts a program of raising rates, Trevisani said. The U.S. government data, including a nonfarm payrolls surge of 288,000 far above Wall Street forecasts of 210,000, bolstered optimism about the U.S. economy for many. "This keeps the Fed on track for tapering and for the first interest rate hikes in 2015," said Anthony Valeri, investment strategist at LPL Financial in San Diego.
(Editing by Nick Zieminski and James Dalgleish)