* Yen hits lows versus dollar, euro after G7 meeting * U.S. April retail sales edge up unexpectedly * More dollar gains depend on continued improvement in U.S. economy * Euro dips on ECB's Visco's comments By Julie Haviv NEW YORK, May 13 (Reuters) - The dollar rose for a third straight session against the yen and euro on Monday as U.S. retail sales data assuaged fears about an economic slowdown in the world's largest economy, prompting participants to ponder the path of Federal Reserve policy. The dollar, which pierced the 100-yen mark last week, continued to add to gains, hitting its highest level against the yen since October 2008 after Group of Seven finance officials over the weekend held back from directly criticizing Japan's monetary policy. The U.S. currency's outperformance can largely be attributed to diverging central bank policies, with aggressive monetary easing in Japan and concerns about the risk of negative deposit rates in the euro zone contrasting with expectations the U.S. Federal Reserve will scale back its asset-buying program later this year. The greenback gained after data showed U.S. retail sales unexpectedly rose in April as households bought automobiles, building materials and a range of other goods, pointing to underlying strength in the economy. The increase in core sales came on the heels of relatively strong job growth over the last three months. The state of the labor market is a key component of Fed policy. "The dollar's strength from last week carried over into today's trading, helped by the retail sales data, which pushed the dollar higher across the board," said Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman in New York. "There are a lot of Fed speakers this week, but it is clear from their last policy meeting that they are debating both sides, either decreasing or increasing stimulus," he said. The bevy of Federal Reserve speakers will provide opportunities for updates on the Fed's exit and the paring back of its asset purchase plan. The dollar last traded at 101.78 yen, up 0.2 percent on the day, having earlier reached a peak of 102.14 on Reuters trading platform, its highest since October 2008, as investors saw the outcome of the G7 meeting as a signal to sell the Japanese currency. An article in the Wall Street Journal over the weekend suggested the Fed was working on a plan to taper its bond buying, currently at $85 billion a month, but gave no indication on the timing. Fed Chairman Ben Bernanke will deliver testimony on May 22 on the outlook for the U.S. economy before the Joint Economic Committee of Congress. Second-quarter U.S. growth could also get a boost from inventories, after businesses kept lean stocks in the first three months of the year. Another report on Monday showed business inventories were flat in March for a second straight month. U.S. Treasury bond yields, which move inversely to price, rose after the data, further fueled by broad dollar strength. Traders said investors took profits on dollar gains above 102 yen, and the currency may struggle in the short term before a reported options barrier at 102.50 yen. But most expect more yen falls, with many seeing a drop toward 105. "It is a one-way bet and every pullback (in dollar/yen) will be met by buying interest," said Niels Christensen, currency strategist at Nordea in Copenhagen, adding that the yen could fall to 105-110 per dollar in the next six months. EURO, AUSSIE FALL The euro was last down 0.1 percent at $1.2974, pressured after European Central Bank policymaker Ignazio Visco said the central bank may opt for negative deposit rates. If the ECB did push its deposit rate into negative territory, banks would effectively be charged for parking spare cash they do not lend. In a Reuters poll conducted after Visco's comments, 22 of 25 euro money market traders said they did not expect the ECB to cut the rate below zero - in line with findings of a wider poll of economists taken last week. Meanwhile, Italy's three-year debt costs fell to their lowest since January at an auction on Monday as the backstop from the European Central Bank fed demand for bonds of the euro zone's heavily indebted members. Against the yen, the euro was flat at 132.08 yen, off an early three-year high of 132.39, according to Reuters data.