The Dollar reached near a four-month high against the Yen on the early trading, after had slumped as the G8 failed to pass a strong message against the Dollar weakness at their weekend meeting. The Dollar traded at 108.30 against the Yen at 7:00am GMT. Gains in Asian stocks raised the risk appetite for carry trades, which involve selling low-yielding currencies like the Yen for higher-yielding currencies and assets. The Japanese currency also depreciated against the Euro; the Yen fell to 166.78 against the Euro at 7:00am GMT.

The Euro is slumping against the Dollar as investors are speculating the US Federal Reserve's shift to fight inflation makes it likely to raise interest rates more aggressively than the European Central Bank. The Dollar traded at 1.5398 against the Euro at 7:00am GMT. According to a Bloomberg survey to 39 firms, investors are predicting the ECB will raise interest rates by a quarter-percentage point by September and then cut borrowing costs by yearend, while Fed is likely to boost interest rates by three-quarters of a percentage point by the end of the third quarter of 2009.

The Pound strengthened against the Euro and the Dollar for a second straight day. The British currency climbed to 0.7870 against the Euro and to 1.9519 against the Dollar at 8:00am GMT. UK inflation probably reached 3.2 percent in May, the most since the measure's inception in 1997, the Bloomberg survey showed. 'People are losing faith in the Bank of England's ability to keep inflation low', said Michael Saunders, chief Western European economist at Citigroup Inc. in London. 'That's why the idea of cutting rates is off the agenda. Central banks have this problem in common, but in the U.K. it seems particularly large.'

Today investors will be paying attention to the release of the Core CPI y/y in the Euro Zone, which is expected to reach 1.8% up from 1.6%, increasing believes that the ECB will raise interest rates. In the US, Empire State Business Conditions Index will be revealed later today, which is forecasted to increase, pushing the Dollar up. Also from the US, Treasury International Capital (TIC) Net Long-Term Transactions will be revealed, which are expected to reveal a negative trend, pressuring the Dollar down.

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