The U.S. Dollar struck a 7-year peak versus the Japanese Yen in the wake of unexpectedly strong labor data from the U.S. which tended to cement investors' view of a forthcoming interest rate increase from the Federal Reserve Bank. Last Friday's release of non-farms payroll data showed 321,000 new jobs were added last month, well above expectations of only about 231,000. For analysts, the labor news highlights the growing divergence in monetary policies between the U.S. and nearly every other major central bank.

As reported at 9:25 am (GMT) In London, the USD/JPY was trading at 121.86 Yen, a level unseen in almost 7½ years; the pair later fell back to 121.50 Yen, not far from Friday's late trade. Expectations for the Japanese economy continue to weigh heavily on the Yen with the Bank of Japan likely to maintain an ultra loose policy to encourage growth. The U.S. Dollar Index was trading at 89.362 .DXY, not far from Friday's 5-year peak at 89.467 .DXY.

Euro Feels the Pressure

In the Eurozone, a cut in Italy's sovereign credit rating by Standard & Poors to very close to junk status is putting more pressure on Euro sentiment. The European Central Bank has been under significant pressure to expand quantitative easing plans and though Mario Draghi disappointed investors last week, he laid the framework for more potential easing early next year. The EUR/USD pair was trading at $1.2289, a gain of 0.1% but still just off the recently struck 2-year trough.