The dollar moved higher against the yen on Monday, nearing last week’s seven year peaks, boosted by the diverging monetary policy stance between the Federal Reserve and its major peers. USD/JPY was up 0.55% to 118.42, not far from Thursday’s highs of 118.96, the most since October 2007. The dollar gained ground amid expectations that the Fed is growing closer to hiking interest rates, while central banks in Japan, Europe and China are likely to stick to a looser monetary policy stance. The Fed wound up its asset purchasing stimulus program last month and is expected to start raising rates around September 2015. Japan’s Prime Minister Shinzo Abe dissolved parliament on Friday, clearing the way for elections to be held on December 15 to seek a fresh mandate for his economic policies, which call for a weaker yen. The elections were called after data early last week showed that Japan unexpectedly fell into recession in the third quarter. Elsewhere Friday, China’s central bank unexpectedly cut interest rates for the first time in more than two years in response to signs of a slowdown in the world’s second-largest economy. The move bolstered expectations for additional measures to spur growth. In the euro zone, bond yields fell to record lows on Monday amid expectations that the European Central Bank is moving closer to embarking on quantitative easing measures to shore up growth. The yield on Spanish 10-year bonds dropped below 2% for the first time, falling to 1.97%, while the yield on Irish 10-year bonds fell to 1.48% from 1.49% late Friday. ECB President Mario Draghi warned Friday that inflation expectations were declining to levels that were very low and said it is ready to expand its stimulus program to boost inflation as quickly as possible. EUR/USD was up 0.39% to 1.2437, off the almost two-year lows of 1.2363 struck overnight. The single currency was also higher against the yen, with EUR/JPY advancing 0.89% to 147.25. The euro found support after a report on Monday showed that German business sentiment improved this month, following six successive months of declines, indicating that the downturn the euro area’s largest economy may have ended. Germany’s Ifo business climate index rose to 104.7, up from 103.2 in October. Economists had forecast a decline to 103.0. The US dollar index, which tracks the performance of the greenback against a basket of six major currencies, slid 0.22% to 88.20, off Friday’s more than four-year highs of 88.51.