FOREX -Dollar bolsters gains on yen after U.S. retail sales data

* Dollar firms against yen, reverses post-payrolls fall

* Euro prodded higher by ECB's Nowotny

NEW YORK, Jan 14 (Reuters) - Robust U.S. retail sales data and a record Japanese current account deficit fueled the U.S. dollar's rally against the yen on Tuesday, while mixed signals from European central bankers kept the euro in check. The greenback rebounded after two days of losses after the Commerce Department said U.S. consumers spent more than expected in December, countering last week's tepid jobs report. "If anything, overall consumer spending and final demand are picking up at the margin, which is at odds with the weak payrolls figures reported last week," said Matthew Derr, FX strategist at Credit Suisse in New York. "We view the payroll figures as an anomaly and today's data seems to bolster that case. As a result, we remain bullish on the dollar." In afternoon trading, the dollar was up 1.17 percent to 104.18 yen, recovering from a more than 1 percent drop on Monday that took it to a one-month low. The yen's woes were compounded by data showing the Japanese government posted a record current account deficit in November as a bulging trade gap weighed on the country's balance of payments. "From our perspective, the trend for the yen remains clear," said Jens Nordvig, global head of currency strategy at Nomura Securities in New York. "Weak trade-related flows combined with increasing asset allocation by Japanese investors to foreign investments is a cocktail that is likely to push the yen gradually weaker." Most banks see a strong case for the dollar to rise this year, given the contrasting outlooks for monetary policy in the United States compared with Europe and Japan, whose central banks are still considering more moves to support growth. The U.S. Commerce Department said on Tuesday retail sales excluding automobiles, gasoline, building materials and food services - or core retail sales - increased 0.7 percent last month versus a consensus estimate for a 0.3 percent rise. November data was however revised lower. Dallas Federal Reserve President Richard Fisher said on Tuesday that he would continue to push for a paring of central bank stimulus. The comments were in line with the strategy adopted by the Fed last month when it cut its monthly bond purchases by $10 billion and said that there would be further gradual reductions. The dollar was also slightly stronger against a basket of major currencies made up of its largest trading partners. The dollar index was up 0.13 percent at 80.62. The euro earlier touched a two-week high against the dollar after European Central Bank governing council member Ewald Nowotny said euro zone growth may surprise on the upside, contrary to concerns expressed by the ECB last week.

"After (ECB President) Mr. Draghi's comments last week, Mr. Nowotny's comments represent conflicting signals and make one cautious on buying the euro in response," said Valentin Marinov, head of European G10 FX Strategy at Citibank in London. "There may still be some room for the euro to be squeezed higher but in the medium term we still see the risks to the downside." Still, euro zone November industrial production numbers also struck a positive note. The euro traded up 0.08 percent on the day at $1.3682.