The Japanese yen surged to seven-month highs against the dollar on Monday as traders aggressively unwound carry trades after a slew of economic data last week raised the prospect of a U.S. economic downturn and bigger rate cuts from the Federal Reserve.

Weaker-than-expected U.S. jobs data, along with disappointing earnings reports from large technology firms and heightened concerns over the Chinese economy, have sparked a global sell-off in stocks, oil and high-yielding currencies in the past week as investors sought the safety of cash.

The selling continued on Monday, with U.S. Treasury yields falling further, stock indexes in the red, bitcoin dumped and the dollar losing ground, mainly to the yen.

The carry-funding favourite, the yen, strengthened as much as 3.4% to 141.675 per dollar at one point.

So called carry trades, where investors borrow in money from economies with low interest rates such as Japan or Switzerland to fund investments in higher-yielding assets elsewhere, have been popular in recent years.

The dollar was last trading at 142.41 yen, down 2.8% on the day, with the yen trading near its strongest level since early January.

The dollar dropped 0.6% against an index of major currencies to trade at 102.65, a near five-month low.

"We are seeing some safe haven demand for traditional currencies like the yen and Swiss franc, but it's also consistent with how FX carry trades have been unwinding at a very, very rapid pace," said Paul Mackel, global head of FX at HSBC.

"This uncertainty is likely to be ongoing at least for the next few days."

The rebound in the yen, which hit a 38-year low against the dollar in July, has also been helped by the Bank of Japan's 15-basis points rate rise last week to 0.25%.

The Swiss franc, another popular funding currency, was about 1% higher at 0.8499 to the dollar. The franc, a traditional safe haven, was also trading at a seven-month high.

High-yielding currencies such as the Indian rupee and Mexican peso tumbled, while currencies that had hitherto been used for funding investments, such as the yen and China's yuan, rallied.

Treasury yields have been falling quite sharply since last week, when the Federal Reserve kept the policy rate in its current 5.25% to 5.50% range while Chair Jerome Powell opened the possibility of a rate cut in September.

But by Friday, after data showed the unemployment rate had jumped, expectations for rate cuts deepened.

Japanese stocks collapsed on Monday in their biggest single day rout since the 1987 Black Monday sell-offs.

The euro was up 0.3% at $1.0944 against a broadly-weaker dollar.

Expectations for European Central Bank (ECB) rate cuts have also risen. Traders now see more than 90 basis points of rate cut from the ECB this year, versus 50 bps a week ago.

"This is a position unwind and since the National Assembly election was called in France, no one's been long euros," Kit Juckes, head of FX Strategy at Societe Generale said, referring to the euro's slide in June after a snap election was called in France.

"The euro will be capped by rate and growth expectations but probably range-bound as a result."

(Reporting by Vidya Ranganathan in Singapore, Sruthi Shankar and Sarupya Ganguly in Bengaluru; Editing by Christopher Cushing, Ros Russell and Christina Fincher)