The yen fell to a fresh seven-year low against the dollar early on Monday, extending a massive selloff sparked by the Bank of Japan's surprise decision to boost its already huge bond-buying stimulus.

Sellers also took aim at the Australian dollar after a survey on Saturday showed China's factory activity unexpectedly fell to a five-month low in October. The Aussie, usually used as a liquid proxy for China plays, dipped to a one-week low at $0.8730, before steadying at $0.8756 AUD=D4.

The dollar came within a whisker of 113.00 yen JPY= in early trade, reaching a high not see since December 2007 and bringing into view that month's peak of 114.66. It last traded at 112.90.

It soared nearly 3 percent on Friday after the BOJ said it would accelerate purchases of bonds so that its holdings increase at an annual pace of 80 trillion yen ($708 billion), up by 30 trillion yen.

The BOJ announcement was followed by news that Japan's $1.2 trillion Government Pension Investment Fund will raise its holdings of foreign stocks to 25 percent from 12 percent, a figure that some analysts said is much higher than expected.

Deutsche bank analyst James Malcolm said investors shouldn't get too hung up on the actual numbers but rather concentrate on the big picture: a broad-based domestic portfolio shift into risky assets.

That should keep the yen pinned down against all its major counterparts. The euro hit a six-month high of 141.40 yen EURJPY=R, while the Australian dollar reached a 17-month peak of 98.91 AUDJPY=R.

Against the dollar, the common currency hovered just above a two-year trough of $1.2485 EUR= set on Friday. Traders suspect the euro will stay on the defensive in the lead up to the European Central Bank policy review on Thursday.

The ECB is under pressure to take additional policy action after data on Friday showed euro zone core inflation slowed to just 0.7 percent in October, well below the central bank's target of near 2 percent.

Sweden's central bank last week cut its key interest rate by a bigger than expected 25 basis points to a record low of zero percent to fight persistently low inflation.

With the euro and yen on the backfoot, the dollar index .DXY stayed within striking distance of a four-year peak of 87.133 set on Friday. It last traded at 87.080.

"Monetary policy divergence between the United States and the rest of G10 was front and center last week with the Fed more hawkish than expected and the BOJ, Riksbank and the RBNZ more dovish," analysts at JPMorgan wrote in a note to clients.

This should be an ongoing theme with the ECB meeting and U.S. payrolls this week, they added, favoring an increase in long dollar positions versus the euro and Swedish crown.

Investors will get more data on China later in the day, including the latest look at the country's services sector and a private survey on its manufacturing sector. ECONCN

Manufacturing surveys from Europe and the United Sates are also on the ticket.