* Japanese output, retail sales fall more than forecast
* Dollar index slips, but still poised for yearly gain
By Lisa Twaronite
TOKYO, Dec 28 (Reuters) - The dollar held above a two-month low against the yen in early Asian trade on Monday, supported by downbeat Japanese economic data and clinging to its recent ranges in holiday-thinned trading.
Some markets, including Australia and many in Europe, will remain closed on Monday after Friday's Christmas holiday. HOLIDAY
Against the yen, the dollar was last down about 0.1 percent at 120.28 yen JPY= , within sight of the 119-yen level in which it has not traded since late October, but above its Friday low of 120.05 yen.
The dollar was up about 0.5 percent against the yen for the year, but down more than 2 percent for the month so far.
Data released earlier on Monday was yen-bearish, although the market's reaction was muted.
Japan's industrial output fell 1.0 percent in November from the previous month, more than the median market forecast for a 0.6 percent drop, suggesting that sluggish emerging market demand continues to cloud the economic outlook. urn:newsml:reuters.com:*:nT9N0WC05E
Separate data showed Japanese retail sales fell 1.0 percent in November from a year earlier, more than a median market forecast for a 0.6 percent fall. urn:newsml:reuters.com:*:nT9N13B011
Those figures came on the heels of mixed data on Friday, that rekindled speculation that the Bank of Japan might eventually opt to take additional stimulus steps to meet its goal of sustainable 2 percent inflation. urn:newsml:reuters.com:*:nL3N14D3OV
The euro was steady against the yen at 131.84 EURJPY= and also against the dollar, changing hands at $1.0965 EUR= .
The dollar index .DXY , which gauges the greenback against a basket of six counterparts, inched down about 0.1 percent to 97.878.
The index was on track to log a loss of more than 2 percent for the month, but was still up more than 8 percent for the year after investors positioned for the U.S. Federal Reserve's widely anticipated first interest rate increase in almost a decade.
(Editing by Richard Pullin)