By Kevin Buckland
TOKYO (Reuters) - Asian stocks rallied and the dollar reached a fresh seven-week peak on the yen on Monday after blowout U.S. labour data dispelled fears of a recession and spurred a sharp paring of rate-cut bets.
Short-term U.S. Treasury yields rose 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 the war.
Japan's Nikkei led regional equity gains with a 2% rally as of 0015 GMT, given additional momentum by the softer yen.
Australia's stock benchmark added 0.12% and South Korea's Kospi gained 0.29%.
Hong Kong's Hang Seng had yet to open, and mainland Chinese stocks remain closed until Tuesday for the Golden Week holiday.
MSCI's broadest index of Asia-Pacific shares climbed 0.4%.
U.S. Dow futures pointed 0.08% higher after the cash index closed at an all-time peak after the payrolls data on Friday.
"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 up 0.18% at 148.87 yen.
Japan's top currency diplomat, Atsushi Mimura, said on Monday that officials will monitor foreign exchange moves, including speculative trading.
The euro eased 0.07% to $1.0971, 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 95% odds on a quarter-point cut, with a small chance that the policy rate stays unchanged, according to CME Group's FedWatch Tool.
The two-year U.S. Treasury yield rose 1.7 basis points to 3.9488% on Monday, the highest in more than a month.
Gold edged 0.1% lower to $2,849.29 an ounce, but 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 lost 65 cents to $77.40 per barrel, while U.S. West Texas Intermediate crude futures declined 53 cents to $73.85 per barrel.
(Reporting by Kevin Buckland; Editing by Jamie Freed)