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SINGAPORE, July 16 (Reuters) The dollar recovered from a record low against the euro on Monday, supported by strong U.S. consumer sentiment and expectations of hawkish comments from the Fed chairman in testimony this week.

Analysts expect Ben Bernanke to tell the U.S. Congress in monetary policy testimony on Wednesday and Thursday that the Federal Reserve is more worried about a flare-up in inflation than about any serious damage to the economy from housing market turbulence.

That helped the dollar recover from a record low of $1.3815 per euro on Friday, driven by a fall in June retail sales and fears the U.S. subprime mortgage crisis could frighten foreign investors away from U.S. credit markets.

"There's been a bit of talk about Bernanke in the market.

It may be an excuse for some consolidation," said Gerrard Katz, head of north Asian currency trading at Standard Chartered Bank.

That, and the fear of being surprised by U.S. inflation figures this week, helped the dollar, traders said.

"Also, the data was very mixed on Friday and you could argue, if anything, the forward-looking data is slightly dollar-positive," Katz said.

At 0600 GMT, the euro was quoted at $1.3790/92.

U.S. stock markets hit record highs on Friday on optimism about consumer sentiment.

The Reuters/University of Michigan Surveys of Consumers said its preliminary July consumer sentiment index was the highest since January.

Last week, ratings agencies Standard&Poor's and Moody's Investors Service warned of downgrades to billions of dollars in risky mortgage debt, undermining the dollar.

Many traders also expect benchmark U.S. interest rates to stay on hold, while other central banks keep tightening monetary policy.

The dollar trade-weighted index was up modestly at 80.59 on Monday, after hitting a 2-1/2-year low of 80.442 at the end of last week.

Data from the Commodity Futures Trading Commission showed the value of net short dollar positions in the week to July 10 swelled to $23.9 billion from $17.3 billion the previous week, according to Reuters calculations, marking the fourth straight increase in such short position.

Some of that could be reversed this week. Although the U.S.

reported a steep drop in retail sales for June, traders said the upbeat July consumer sentiment data and anticipation of a hawkish message from Bernanke supported the dollar.

"Until it is clear the subprime situation has flowed through into the broader economy, it won't affect the Fed," said Sue Trinh, a strategist at RBC Capital Markets in Sydney.

"We favour yen underperformance, then the dollar and then euro, in that order," Trinh said.

KIWI GAINS A public holiday in Japan thinned trading volumes in Asia.

The yen was a shade weaker at 122.10 per dollar and seemed to be sold against the New Zealand dollar after data showed second-quarter consumer prices in New Zealand rose more than expected.

The kiwi traded up to $0.7907, its highest since it was floated in 1985, according to Reuters data. Traders said the yen's dip suggested people were using cheap yen again to buy the New Zealand dollar. That pursuit of high yield also favoured the Aussie dollar, pushing it to an 18-year high of $0.8718.

"It is worthy of note that dollar/yen was bid after the New Zealand data, which suggests that there is ongoing interest out of Japan into the carry trade," said Robert Rennie, Westpac Bank's currency strategist.

Trinh said she was targeting the kiwi at $0.82 by the end of September and that there was a strong case for the Reserve Bank of New Zealand (RBNZ) to raise rates again later this month, a possibility the market had not fully priced in.

Last week, the RBNZ said it would continue to intervene in markets if it saw the currency at extreme levels. "The market continues to underestimate the extent of the RBNZ tightening cycle," Trinh said.

"RBNZ's jawboning of the currency lower is just a distraction in this environment which is bullish carry trades," she added.

REUTERS PBB VV1332