* Dollar recovers as U.S. retail sales halt slide in U.S. yields
* Yen weakens, Australian dollar also suffers
* Canadian dollar hits four-year low
LONDON, Jan 15 (Reuters) - The dollar index gained for a second straight day on Wednesday, helped by firmer U.S. yields that pulled the greenback away from a one-month low against the yen and sent the Canadian dollar to a fresh four-year low.
Traders said U.S. yields , which correlate with the dollar index, were helped by upbeat retail sales. The data offset Friday's disappointingly soft payrolls and halted a two-day slide in U.S. Treasury yields.
The dollar index was up 0.25 percent at 80.858, with gains seen across the board. It was up 0.1 percent at 104.35 yen , building on Tuesday's recovery, when it rallied more than 1 percent to pull away from a near one-month low of 102.85.
The euro was down 0.4 percent against the dollar at $1.3625 while growth-linked currencies also weakened. The Australian dollar fell 0.6 percent to $0.8910 while the dollar rose to a four-year high against its Canadian counterpart of C$1.0992. Option barriers were cited at C$1.10 which were capping the dollar's rise for now, traders said.
"It is mostly a dollar move higher and we like the yen weakening some more especially against the dollar," said Alvin Tan, currency strategist at Societe Generale.
"The drop in the Canadian dollar is part of the U.S. dollar strength story, though in the short term we feel that the sell-off may have been a bit overdone."
Also helping underpin the dollar, two of the Federal Reserve's most hawkish policymakers who take up voting power this year said the central bank should bring its bond-buying programme to a swift close.
Investors quickly brought forward the likely timing of the first Fed rate hike to August 2015 , having only just pushed it out towards the back end of 2015 in the wake of Friday's jobs numbers.
In contrast, the Bank of Japan is expected to continue pumping in trillions of yen to help the economic recovery while the European Central Bank is still grappling with falling inflation and has pledged to keep rates low for longer.
But with the ECB's balance sheet still contracting as banks repay cheap loans availed of earlier, the euro's losses against the dollar are likely to be muted, analysts said. Repayment of these loans cause excess liquidity in the euro zone banking system to shrink and push up short term money market rates.
Excess liquidity dipped to 154 billion euros ($211 billion) from 155 billion on Tuesday.
"Tight euro zone liquidity in the short term is probably slightly positive for the euro, although we are encouraged to have seen the euro/dollar rally, post U.S. jobs data, to have stalled at $1.3700," said Chris Turner, head of currency strategy at ING.
The euro, though, was trading near a four-year high against the Canadian dollar, with the latter under broad pressure after recent weak data raised concerns about whether the Bank of Canada may sound more dovish next week.
"We are looking for dollar/Canadian dollar to rise to C$1.12," said Mankash Jain, head of FX and Investment Management, at Solo Capital, a hedge fund. "Unless there is strong economic data coming out of Canada we expect dollar strength to weaken the Canadian dollar further."