FOREX-Dollar pares losses vs yen after CPI report

NEW YORK, July 16 (Reuters) - The dollar pared losses against the yen on Friday after a government report showing U.S. consumer prices fell for a third straight month in June.

Against the yen JPY=, the dollar rose to 86.87 from 86.60 previously, still down 0.7 percent on the day. The euro fell to $1.2992 EUR=, from $1.2999 before the data's release.

"The core is up a little bit more than expected, and the initial bond market reaction has been a bit of selling," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey. "That's firmed up dollar-yen a bit."

The Labor Department said its closely watched Consumer Price Index fell 0.1 percent in June and rose 0.2 percent excluding food and energy.

Analysts polled by Reuters had forecast headline CPI to be flat in June and rise 0.1 percent excluding food and energy. For more, see [ID:nN16242811]. (Reporting by Nick Olivari and Steven C Johnson; Editing by Theodore d'Afflisio)