By Chibuike Oguh

NEW YORK (Reuters) -The U.S. dollar hovered near a seven-week high on Monday as investors reassessed their positions following Friday’s strong U.S. jobs data and amid rising tensions in the Middle East.

The closely-watched jobs report for September showed the biggest jump in payrolls for six months, a drop in the unemployment rate and solid wage rises, prompting markets to scale back bets on further hefty U.S. rate cuts.

The was down 0.06% at 102.47, having risen on Friday to 102.69, its highest level since mid August. The dollar logged a weekly gain of more than 2% last week, its biggest in two years.

“We’re still having a bit of follow through from Friday’s jobs data and you can see this on the US interest rates and I think this is what’s helping give the dollar a bit of a lift here today against most of the major currencies,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

Against the Japanese yen, the dollar weakened after Atsushi Mimura, Japan’s top currency diplomat, issued a warning against speculative moves on the foreign exchange market.

Separately, Katsunobu Kato, the nation’s newly appointed finance minister, said the government would monitor the impact of rapid currency moves and take action if necessary.

The dollar was last down 0.37% at 148.08 yen.

“The market got cautious as we approached 150 on the yen, but I don’t think this is a big move yet,” Chandler said.

In the Middle East, Hezbollah fired rockets at Israel’s third largest city Haifa early on Monday as Israeli forces looked poised to expand ground incursions into southern Lebanon on the first anniversary of the Gaza war, which has spread conflict across the Middle East.

The euro stood was flat at $1.097575, after German industrial orders fell significantly more than expected in August, adding to signs that manufacturing in Europe’s largest economy remains in the doldrums.

“The euro’s resilience is notable given the dramatic drop in German factory orders; but tomorrow we’re going to get industrial production and it’s likely to pick up at the end of the day,” Chandler added.

Sterling fell 0.34% to $1.30790.

Sterling recorded its biggest daily fall last week since April after Bank of England Governor Andrew Bailey was quoted as saying the central bank might move more aggressively to lower borrowing costs.

Markets expect the Federal Reserve to cut rates by just 25 bps in November, rather than 50 bps, following the jobs data. According to CME’s FedWatch tool, markets are pricing in a 85% chance of a quarter point cut, up from 47% a week ago, and a slim prospect of no cut at all.

The yield on benchmark U.S. 10-year notes hit its highest level since in 2 months at 4.030% in New York trade. It was last up 4.3 basis points to 4.024%.

“As recently as the end of September the Fed funds futures were fully pricing in three 25 basis point cuts and now they’re basically pricing in one cut,” said Eugene Epstein, said Eugene Epstein, head of structured products, North America at Moneycorp in New York.

“That’s exactly why the dollar’s stronger and 10-year yields are higher.”