Dollar surges above 114 yen, holds gains from BoJ policy move

The dollar topped 114 yen on Monday, its highest level in nearly seven years, extending gains spurred by the Bank of Japan's surprise decision last week to boost its already massive bond-buying stimulus in an effort to lift a moribund economy.

Broad-based dollar buying has been a trend in the last few months, bringing the dollar index, which measures the greenback against a basket of currencies, to a fresh four-year high.

In New York trade, the greenback was given a brief push higher on an Institute of Supply Management report showing manufacturing expanding more than expected in October.

However, this was juxtaposed against two weaker-than-expected reports, one from financial data firm Markit saying U.S. manufacturing slowed in October to its lowest rate since July, and another from the U.S. Commerce Department stating U.S. construction spending fell for a second straight month in September.

Sellers also targeted the euro, which slipped to a new two-year low against the dollar ahead of a European Central Bank meeting later this week, which will be watched closely for any indication that policy will be eased further to shore up the euro zone's stuttering economy.

The dollar hit a new four-year high against a basket of major currencies of 87.400, adding to gains made last week on the BoJ's decision and the U.S. Federal Reserve's policy statement that was less dovish than expected.

The dollar surged to 114.20, its highest since December 2007, before slipping back to 114.04, a gain of 1.55 percent on the day.

Euro weak before ECB

In a sign of just how bearish sentiment is against the yen, the struggling euro touched a seven-month high above 142 yen, up on the day.

But against the dollar, the euro fell in Asian trading, its weakest since August 2012. It was last trading near $1.25, down on the day.

Euro zone manufacturing activity expanded slightly slower than first thought last month as further discounts at the factory gate failed to drive up new orders, a business survey showed on Monday.

Traders suspect the euro will stay on the defensive in the lead-up to the European Central Bank policy review on Thursday.