* Yen off initial highs set after China data disappoints
* China investment, factory output, retail sales miss forecasts
* Safe haven yen later sags as equities show resilience
* Upbeat U.S. data helps underpin dollar index (Updates prices, adds comments)
By Ian Chua and Masayuki Kitano
SYDNEY/SINGAPORE, May 16 (Reuters) - The yen reversed course and eased versus the dollar on Monday, after rising initially as disappointing economic news out of China shored up demand for the safe-haven currency.
Chinese investment, factory output and retail sales all missed forecasts, adding to doubts about whether the economy is stabilising. dollar initially fell versus the yen in early Asia trade. It touched a low of 108.46 yen JPY= , retreating from two-week highs of 109.57 set on Friday, when the dollar gained a lift from upbeat U.S. data.
The dollar later recovered its losses and last stood at 108.90 yen JPY= , up 0.2 percent on the day.
The yen came off its earlier highs as Tokyo shares .N225 drew strength from strong U.S. data on Friday that helped offset worries over softness in Chinese economic indicators. said a near-term focus for the yen is Japan's first-quarter gross domestic product data on May 18. GDP was expected to have expanded at a scant, annualised rate of 0.2 percent in January-March, according to a Reuters poll, after a 1.1 percent contraction in October-December.
"There are likely to be some market swings if the result were to come in much weaker than expected," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mistui Banking Corporation in Singapore.
If the GDP number is weak, Japanese equities will probably fall initially and bolster safe haven demand for the yen, Okagawa said.
The yen might retreat later, if such an outcome leads to some form of economic policy response by the government such as shifting toward delaying a sales tax hike set for next April, Okagawa added.
Japan's top government spokesman on Monday denied a weekend media report that Prime Minister Shinzo Abe has decided to delay the sales tax hike. near-term key for the dollar is whether it can clearly breach resistance at 109.47 yen, the 61.8 percent retracement of its fall from late April to early May, analysts say.
"If it does clear above 109.50, I think it does point to a more bullish dollar set-up," said Sim Moh Siong, FX strategist for Bank of Singapore.
The Australian dollar, often used as a liquid proxy for China plays, touched a 2-1/2 month low at $0.7236 AUD=D4 . The Aussie later pulled up from that low and last stood at $0.7287, up 0.3 percent on the day.
Against a basket of major currencies, the greenback stood at 94.637 .DXY , holding within sight of Friday's peak of 94.845, its highest level since April 25.
The euro eased 0.1 percent to $1.1307 EUR= , not far from Friday's two-week low of $1.1283.
Data showing that U.S. retail sales rose 1.3 percent last month, their biggest increase in a year, had helped lift the dollar on Friday.
The upbeat figures suggested the U.S. economy was regaining momentum and came after comments from several Federal Reserve officials revealed growing pressure within the central bank to raise rates in the coming months. U.S. Treasury yields failed to rise on the data, suggesting debt investors were reluctant to price in higher rates against a global backdrop of low inflation and low growth.
The U.S. 10-year Treasury yield last stood at 1.712 percent US10YT=RR , hovering near a one-month low 1.70 set on Friday and touched again on Monday.