By Alun John

HONG KONG (Reuters – On Monday the Japanese yen was weakening ahead of a week that will focus on policy. Inflation will take center stage with a key European Central Bank meeting and U.S. consumer pricing data.

In early trading, the dollar reached 130.99 yen, an all-time high for the month, not far from its 20-year-high of 131.34. It gained 2.95% in last week’s trade.

Also, the euro rose on Japanese currency. It reached 140.38 yen Monday morning. That’s an increase of seven years.

Barclays (LON:). Analysts have attributed last week’s softening yen to a rebound in risk assets, an increase in overseas yields and concerns over Japan’s balance of trade.

Following the release of good employment and manufacturing data, the, which tracks the greenback’s value against six major peer currencies, stood at 102.1.

Many traders are focusing their attention on Thursday’s European Central Bank meeting. This is likely to lay the foundation for a July interest rate increase.

Some market speculate that the ECB might start by increasing its base rate 50 basis points after record-breaking euro zone inflation.

Currently markets are pricing in 125 basispoints of increases at the ECB’s four meeting this year.

Barclays stated that “With the (euro-area) inflation still to peak, we believe the onus lies on the ECB, to push back against any possibility of a 50bp increase in July.” But, President Lagarde could leave out all options, and market pricing would likely continue its advance. This will provide the basis for a recovery.

Sterling was $1.249. The euro closed Monday at 1.0725, while the dollar was stable at 1.0725.

The Reserve Bank of Australia’s meeting is scheduled for Tuesday. Most polled analysts by Reuters expected a 25-basis-point rate hike. However, some forecast a 40 basis-point increase.

After gaining 0.67% in the previous week, Monday’s Australian dollar reached $0.7204

The U.S. Consumer Price Index, due Friday, is another major event.

High inflation levels would increase expectations of U.S. Federal Reserve aggressive tightening and could end speculation last month that Fed might not raise interest rates during its September meeting.

Priced in: June and July 50 basis-point increases [FEDWATCH]

The stock market was still shaky at $30,000 but it settled slightly earlier, trading at $30,000.