By Christina Fincher

LONDON, July 10 (Reuters) The yen hit a one-month high against the dollar and a two-week peak versus the euro on Monday as robust data bolstered speculation the Bank of Japan would raise interest rates this week for the first time in six years.

Oil prices continued to retreat from last week's record high, falling below a barrel on expectations of progress in talks on Iran's nuclear programme.

Stock markets were mixed. The Nikkei stock average ended up 1.6 percent, helped by stronger than expected Japanese core private-sector machinery orders, a key gauge of capital spending by companies.

But European stocks struggled as easing crude prices weighed on oil heavyweights BP and Total. The pan-European FTSEurofirst 300 index was flat at midsession, having fallen as much as half a percent in early trade.

U.S. stock futures pointed to a stronger start with investors focusing on corporate earnings. Alcoa Inc, the world's largest aluminium producer, will kick off the second quarter reporting season after trading hours.

The Bank of Japan ends a two-day policy meeting on Friday and is widely expected to raise its overnight call rate from zero to 0.25 percent.

Holger Schmieding, economist at Bank of America, welcomed the likely end of Japan's zero interest rate policy as a logical consequence of an improving economic performance.

''We do not view a gradual removal of the BoJ's monetary stimulus as a threat to either the Japanese economy or to Asian and global financial markets,'' said Schmieding. ''We are inclined to applaud the BoJ and look for healthy growth in Japan and beyond.'' OIL PRICES EASE U.S. crude futures fell 50 cents to .60 a barrel, extending the previous session's 1.4 percent fall.

Prices hit a record high of .78 early on Friday but later fell on signs of easing tension between the West and Iran, with European Union foreign policy chief Javier Solana due to meet Iranian representatives on Tuesday.

''We saw a big drop on Friday night as the Iranian talks kicked off,'' said Tobin Gorey, commodities strategist at the Commonwealth Bank of Australia. ''It's hard to want to short this market, but perhaps some of the reasons that drove us above were seen to be flimsy, and investors locked into some profits.'' U.S. Treasuries slipped, giving up some of the gains made at the end of last week. The yield on the 10-year Treasury note was 1.5 basis points higher at 5.15 percent.

The yen struck a one-month peak against the dollar at 113.36 before paring gains. But the Japanese currency held at a two-week high against the euro as markets braced for a Japanese interest rate hike on Friday.

The dollar held near Friday's one-month low versus the euro, reached after a weaker-than-expected U.S. jobs report tempered expectations for the Federal Reserve to raise interest rates again in August.

''Speculation ahead of the BOJ meeting is really supporting the yen and that's why we are seeing it performing so well,'' said Niels From, currency strategist at Dresdner Kleinwort.

REUTERS SBA HT1914