FOREX-Dollar pinned down by easing Fed rate hike expectations
* Dollar on back foot after lackluster US retail sales data
* Lower Treasury yields also weighing
* Market shows little reaction to weak Japanese GDP data (Updates prices, adds quote)
LONDON, Aug 15 (Reuters) - The dollar was softer on Monday, pegged back by sluggish U.S. data that tempered expectations of a Federal Reserve interest rate hike this year.
The U.S. currency was 0.3 percent lower at 100.95 yen after losing 0.6 percent on Friday, when retail sales and producer prices came in weaker than expected. The euro was up 0.15 percent at $1.1172, having risen 0.2 percent on Friday.
The dollar index was weaker at 95.62 after dropping to 95.254 on Friday, its lowest since Aug. 3.
U.S. Treasury yields slid on Friday, with the 10-year yield falling 5 basis points to a two-week low of 1.48 percent. It traded at 1.51 percent on Monday.
"After the disappointing retail sales and what our economists see as downside risks to the July U.S. consumer price inflation print on Tuesday, we see very limited scope for dollar strength against the euro and the yen," said Petr Krpata, currency strategist at ING in London.
U.S. consumer inflation is forecast at zero month on month for July, down from 0.2 percent in June, and annual headline inflation is also expected to slow amid lower oil prices. . Last week, productivity numbers indicated subdued inflationary pressures, all of which underpinned expectations that the Fed will be in no hurry to raise rates.
Federal funds futures implied traders saw a 43 percent chance the central bank would increase rates at its December policy meeting, down from 47 percent before Friday's data. Traders said the Fed minutes from the July meeting and due for release on Wednesday could give investors more clues on policy.
"The weak July retail sales report should help keep the Fed on the sidelines and should also be reflected in this Wednesday's release of the Fed minutes," Morgan Stanley analysts said in a note.
"There is no reason for the Fed to take on risks related to an early rate hike when its inflation expectations remain depressed."
Markets showed little reaction to data on Monday showing Japan's economy expanded 0.2 percent year on year in the second quarter, well below expectations for 0.7 percent. .
The Australian dollar was 0.3 percent higher at $0.7668 , having risen to a 3-month high of $0.7760 last week thanks in part to the country's relatively higher debt yields. (editing by John Stonestreet)
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