* U.S. retail sales unexpectedly flat, hurt dollar
* Sterling falls on BOE Inflation Report, wages data
* Yen subdued after Japan Q2 GDP contraction (Recasts with U.S. retail sales, adds analyst comment, updates prices, changes byline, dateline; previous LONDON)
By Gertrude Chavez-Dreyfuss
NEW YORK, Aug 13 (Reuters) - The dollar slid against most currencies on Wednesday after data showed U.S. retail sales were flat in July after gains the previous month, reflecting an uneven recovery for the world’s largest economy.
The report, which suggested the Federal Reserve would not be hard-pressed to raise interest rates any time soon, pushed the dollar to one-week lows against a struggling euro.
Data on Wednesday showed retail sales, which had increased 0.2 percent in June, were held back by a second straight month of declines in receipts at auto dealers, as well as weak sales of furniture and electronics and appliances.
July’s reading was the weakest since January. Economists polled by Reuters had forecast retail sales increasing 0.2 percent last month.
“We have a slightly weaker dollar due to the retail sales that came in weaker than expected,” said Sireen Haraji, currency strategist at Mizuho Corporate Bank in New York.
“The report draws a picture of weaker consumer spending in the third quarter. That plays into expectations the Fed will be in no hurry to raise interest rates.”
Higher interest rates tend to boost the dollar’s allure because they mean more attractive yields for some U.S. assets.
The euro rose as high as $1.3415 against the dollar following the retail sales number. That was the highest level in a week. It was last at $1.3387, up 0.2 percent.
Earlier, the euro was held back by euro zone data that showed factory output fell 0.3 percent in June after a 1.1 percent drop in May.
Sterling, meanwhile, fell after a Bank of England report forecast subdued growth in wages in coming months, leading markets to push back until early next year expectations of higher interest rates.
The British pound fell to a 10-week low of $1.6716 against the dollar to $1.6825, a far cry from its July peak of $1.7192 which was its highest level since late 2008. It also fell against the euro, with the single currency rising by 0.3 percent to trade at 79.81 pence.
Japan’s economy shrank an annualised 6.8 percent in the second quarter, data showed on Wednesday, its biggest contraction since the March 2011 earthquake and tsunami, as a sales tax hike took a heavy toll on household spending.
The annualised contraction in gross domestic product was slightly less than forecasts for a 7.1 percent drop. But it will keep pressure on policymakers to ease policy in coming months, to ward off any risk of a prolonged slowdown caused by the tax increase.
The yen showed limited reaction to the data initially but fell in European trade. The dollar was last up 0.1 percent to 102.31 yen, having traded between 103.15 yen and 101.51 yen over the past couple of weeks. (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Anirban Nag in London; Editing by Meredith Mazzilli)