* Japanese output, retail sales fall more than forecast
* Dollar index slips, but still poised for yearly gain
* Yuan edges down after marking first weekly rise in 8 weeks
By Lisa Twaronite
TOKYO, Dec 28 (Reuters) - The dollar moved away from a two-month low against the yen in Asian trade on Monday, following downbeat Japanese economic data in holiday-thinned trading.
Some markets, including Australia and many in Europe, will remain closed on Monday after the Christmas holiday on Friday. HOLIDAY
"Liquidity will probably be low in the run-up to New Years," said Marshall Gittler, head of investment research at FXPrimus Europe.
"There could be some sudden moves though as small orders can move the market unpredictably. Volatility tends to increase towards the end of the year," he said in a note to clients.
Against the yen, the dollar was last steady at 120.42 yen JPY= , off a session low of 120.17 yen as well as its Friday low of 120.05 yen.
The dollar was up about 0.6 percent against the yen for the year, but down more than 2 percent for the month so far.
Japanese 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:*:nL3N14E10X
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.
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 rose about 0.3 percent against the yen to 132.19 EURJPY= and also added about 0.1 percent against the dollar, changing hands at $1.0977 EUR= .
The dollar index .DXY , which gauges the greenback against a basket of six counterparts, inched down about 0.1 percent to 97.858.
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.
China's yuan edged down against the dollar after marking its first weekly rise in eight weeks. The People's Bank of China, prior to market open, set the midpoint rate CNY=SAEC at 6.475 per dollar, or 0.06 percent weaker than the previous fix of 6.4713.
(Editing by Richard Pullin and Jacqueline Wong)