The dollar weakened early Thursday, reacting after an unexpectedly tame retail-level inflation report dampened hopes the Federal Reserve will keep raising interest rates at a brisk clip -- tightening that would protect the U.S. currency. The dollar last traded at 111.81 Japanese yen, down from 112.09 yen before the news. The euro stood at $1.2105, up from $1.2070 before the report. The Labor Department said the consumer price index for June was unchanged, as energy prices actually fell. Economists, on average, had expected consumer prices to rise 0.2%. Separately, the Commerce Department reported a 1.7% increase in retail sales for June, helped by a 4.8% rise in auto sales. Economists had been looking for growth of 1%. The dollar had rallied against its chief counterparts Wednesday and held most of its gains in European trading Thursday morning, playing off a report showed the U.S. trade gap narrowed 2.8% in May to $55.3 billion. The report was followed up by revised budget forecasts from the White House projecting a narrower federal shortfall than previously expected. The reports combined to soothe, at least for now, concerns that the dollar will remain bogged down by U.S. financial imbalances. Worries over the nation's financial health accounted for the dollar's three-year decline, culminating in multiyear lows set late last year. But the greenback's rebounded so far this year as the U.S. has outpaced growth in the world's other industrialized economies. Coming in reaction to that growth, rising U.S. interest rates increase demand for dollar-denominated assets from foreigners