The dollar powered to a seven-year peak against the yen and a two-year high against the euro on Monday, extending gains on the Bank of Japan's latest stimulus action and punishing oil and gold priced in the U.S. currency.
The BOJ's moves to lift growth and inflation bolstered expectations the European Central Bank, which meets on Thursday, would eventually resort to large-scale purchases of government bond, driving benchmark euro zone yields lower <GVD/EUR>.
Continue Reading Below
However, data showing factories across the euro zone and Asia generally lost momentum last month tempered investors' mood, weighing on global stocks.
China's services sector grew at its slowest pace in nine months, the National Bureau of Statistics said, as a cooling property sector weighed on demand.
Another official purchasing managers' index survey on Saturday showed factory activity in the world's second-largest economy unexpectedly fell to a five-month low in October as firms faced slowing orders and rising borrowing costs.
"The optimism created by the Bank of Japan by increasing their purchase of quantitative assets has been hit by the Chinese manufacturing data released today, which fell well short of expectations," Naeem Aslam, chief market analyst at Ava Trade, said.
Final euro zone manufacturing PMI data for October showed activity picking up compared with September, though the final figure was lower than an earlier flash estimate.
German manufacturing returned to modest growth but French factory activity contracted faster than in September.
The U.S. ISM survey due later on Monday is forecast to show manufacturing maintained a healthy expansion in October.
European shares fell, unwinding some of last week's sharp gains. The pan-European FTSEurofirst 300 index <.FTEU3> was down 0.4 percent at 1200 GMT.
MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> fell 0.6 percent, off a five-week high hit after the BOJ on Friday expanded its huge stimulus spending in a stark admission that growth and inflation had not picked up as expected after a sales tax hike in April.
Tokyo stocks, which rose more than 4 percent on Friday, were closed on Monday for a holiday.
Wall Street looked set to open flat to lower, according to stock index futures <SPc1>. Both the Dow Jones Industrial average <.DJI> and the S&P 500 <.SPX> saw record closing highs on Friday.
The dollar surged past 113 yen for the first time since December 2007 and was last up 1.25 percent at 113.67 yen <JPY=>.
"The question is how high can we go," said Valentin Marinov, head of European G10 currency strategy at Citi in London.
"The move on Friday was dominated by a yen sell-off across the board, but … any move higher from here in the near-tern would depend on further dollar outperformance."
The euro hit a low of $1.2439, its weakest in more than two years. It was last down 0.2 percent at $1.2496 <EUR=>.
These moves helped push the dollar to highs not seen since mid-2010 versus a basket of currencies <.DXY>.
The strong dollar and the Chinese data helped push Brent crude <LCOc1> prices lower, though it later recovered to just above $86 a barrel.
Gold <XAU=> held close to four-year lows, also due to the strength of the U.S. currency. It last traded at $1,173.00 an ounce.
The Chinese numbers supported safe-haven German government bonds. Ten-year German yields <DE10YT=TWEB> fell a basis point to 0.842 percent.
(Additional reporting by Wayne Coe in Sydney, Blaise Robinson in Paris, Jehn Geddie and Jemima Kelly in London; Editing by Hugh Lawson)