July 14, 2015 / 3:19 PM / 2 years ago

FOREX-Dollar eases on surprise drop in U.S. retail sales

* Euro up vs dollar after shedding 1.5 pct on Monday

* Yellen testimony on Wednesday awaited

* Sterling jumps after Carney says rate hike getting closer (Recasts with U.S. retail data; changes byline and dateline, previous LONDON)

By Michael Connor

NEW YORK, July 14 (Reuters) - The dollar posted moderate losses against the euro and yen on Tuesday as figures showing a surprise drop in U.S. retail sales in June dented optimism about U.S. economic growth and clouded prospects for a September rate hike by the Federal Reserve.

U.S. retail sales slipped 0.3 percent last month, the weakest reading since February, as consumers cut back on purchases of automobiles and other goods, according to a Commerce Department report. Excluding automobiles, gasoline, building materials and food services, core retail sales dipped 0.1 percent following a 0.7 percent gain in May.

Economists polled by Reuters had forecast retail sales rising 0.2 percent. Core retail sales had been expected to increase 0.4 percent.

Coming after a disappointing employment report for June and a sharp drop in small business confidence, the weak retail sales data suggested the U.S. economy may have lost some momentum at the end of the second quarter after struggling in early 2015.

Separately, the Commerce Department said U.S. business inventories rose modestly in May, suggesting restocking will probably not contribute to economic growth in the second quarter.

The euro, which fell 1.5 percent against the dollar on Monday in the wake of Greece's deal with creditors, was up 0.22 percent at $1.1026.

The dollar was last off 0.05 percent at 123.37 yen, dropping as low as 122.93. It earlier hit a 12-day high of 123.74 yen as the Japanese currency lost its safe-haven appeal with the worst-case scenario of Greece exiting the euro seemingly averted.

Sterling jumped to a one-week high of $1.5630 after Bank of England Governor Mark Carney said the time for a first UK rate hike since the financial crisis was getting closer. It was last at $1.5566, up 0.50 percent.

Oil-rich Norway's crown sank over 1.5 percent, while the Canadian dollar hit a four-month low after Iran and major world powers reached an historic nuclear deal that will grant Tehran relief from sanctions.

With the Greek debt crisis temporarily off center-stage, traders were moving cautiously ahead of scheduled testimony on Wednesday and Thursday by Fed Chair Janet Yellen, according to Fabian Eliasson, head of U.S. currency sales at Mizuho Bank in New York.

Investors expect the Fed to start raising rates later this year, in contrast to the European Central Bank and the Bank of Japan, which are seen continuing with their ultra-loose monetary policies for the foreseeable future. (Editing by Peter Galloway)

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