TOKYO >> Asian stocks rallied and the dollar reached a fresh seven-week peak on the yen on Monday after blowout U.S. labor market data dispelled fears of a recession and spurred a sharp paring of rate-cut bets.

U.S. Treasury yields touched two-month highs, extending their rise after the closely watched non-farm payrolls report on Friday showed the economy unexpectedly added the most jobs in six months in September.

Crude oil prices eased from a one-month peak even as Israel bombed targets in Lebanon and the Gaza Strip, with Monday marking one year since the Hamas attack that triggered war.

Japan’s Nikkei led regional equity gains with a 2.28% rally as of 0515 GMT, given additional momentum by the softer yen.

Hong Kong’s Hang Seng rose 1.45%, Australia’s stock benchmark added 0.68% and South Korea’s Kospi gained 1.53%. Mainland Chinese stocks remain closed until Tuesday for the Golden Week holiday.

MSCI’s broadest index of Asia-Pacific shares climbed more than 1%.

Dow futures eased slightly, after the cash index closed at an all-time peak on Friday following the payrolls data.

“The reaction in markets conveys what the key themes and risks for market participants are presently: economic growth, and its impact – for equities – on future earnings,” said Kyle Rodda, senior financial market analyst at Capital.com.

“There’s also seemingly a revival of the U.S. economic exceptionalism trade.”

The U.S. dollar pushed as high as 149.10 yen for the first time since Aug. 16 before last trading hands at 148.49 yen.

Gains were arrested after Japan’s top currency diplomat, Atsushi Mimura, said officials were monitoring foreign exchange moves, including speculative trading, “with a sense of urgency”.

The euro eased 0.08% to $1.0966, slipping back towards Friday’s seven-week trough at $1.09515.

Bets for a super-sized 50-basis-point rate cut at the Federal Reserve’s next policy announcement on Nov. 7 – which had been above 50% a week ago – were completely erased after the payrolls report.

Instead, traders now lay 96% odds on a quarter-point cut, with a small chance that the policy rate stays unchanged, according to CME Group’s FedWatch Tool.

“All of a sudden, the idea of U.S. economic exceptionalism is back in vogue,” and some traders even seem to doubt the idea of two quarter-point reductions at the two remaining Fed policy meetings of the year, said Michael Brown, senior research strategist at Pepperstone.

“The jobs report pointed to an unexpectedly strong employment situation, which should keep consumer spending underpinned, and leaves a soft landing still on the cards,” Brown said.

However, he still expects 50 basis points of cuts by year-end, despite “the frenzied nature of sentiment at the moment.”

The 10-year U.S. Treasury yield touched 3.992% on Monday for the first time since Aug. 7. The two-year yield rose as high as 3.965%, a level last seen on Aug. 22.

That pulled regional bond yields higher, with 10-year Japanese government bond yields reaching the highest since Aug. 6 at 0.915%.

Gold dropped 0.35% to $2,643 an ounce amid the dollar’s resurgence, although it remained not far from last month’s record peak of $2,685.42.

Crude prices slipped following their biggest weekly gains in more than a year amid the mounting threat of a region-wide war in the Middle East.

Brent crude futures fell 35 cents to $77.70 per barrel, after reaching $79.30 on Friday, the highest since Aug. 30.

U.S. West Texas Intermediate crude futures declined 25 cents to $74.13. On Friday, they rose as far as $75.57, the highest since Aug. 29.