FOREX-Dollar recovers as strong U.S. data soothes market nerves

* U.S. retail sales data boosts greenback

* Norway's crown falls after Norges Bank flags uncertainty (New throughout, updates rates and adds comments post-U.S. market open; new byline, changes dateline, previous LONDON)

By Saqib Iqbal Ahmed

NEW YORK, Aug 15 (Reuters) - The dollar recovered from early weakness against the safe-haven yen as better-than-expected U.S. retail sales data on Thursday eased fears that the U.S. economy could be headed for a recession.

The Japanese yen, which tends to benefit during geopolitical or financial stress as Japan is the world's biggest creditor nation, has strengthened about 0.3% against the dollar this week as investors reached for safety.

The yen started the day strong against the dollar as investors fretted over this week's economic data from China and Germany that revealed the extent of the damage the China-U.S. trade dispute is causing to the world economy.

The Japanese currency advanced sharply against the greenback on Wednesday after the first inversion in the U.S. Treasury yield curve in 12 years sparked heightened fears of an imminent end to the longest economic expansion in U.S. history.

However, the yen retreated against the greenback on Thursday after data showed U.S. retail sales surged in July, helping assuage financial markets' fears that the U.S. economy was heading into recession.

"With the rest of the world sliding into the abyss, the July retail sales figures show a resurgent U.S. consumer riding to the rescue once again," Michael Pearce, Senior U.S. Economist at Capital Economics said in a note.

U.S. retail sales rose in July as consumers bought a range of goods even as they cut back on motor vehicle purchases, which could help ease financial markets' fears that the economy was heading into recession.

The dollar was up 0.27% against the yen.

The dollar index, which tracks the greenback versus the euro, yen, sterling and three other currencies, was up 0.18% at 98.166, close to a two-week high.

Elsewhere, Norway's crown weakened after its central bank, the Norges Bank, said its policy outlook was now more uncertain, raising doubts about whether it would raise rates later in 2019.

The crown slipped to a near 18-year low against the U.S. dollar.

The Australian dollar was up 0.44% to $0.6777 after data showed the Australian economy had added a forecast-busting 41,100 new jobs in July.

However, as the Sino-U.S. trade war raises fears of a global recession, businesses run the risk of being caught in a self-fulfilling vicious cycle, a top Australian central banker warned on Thursday.

Meanwhile, sterling rose 0.46% against the dollar, helped by better-than-expected retail sales and news that Britain's opposition Labour Party has begun its bid to bring down Prime Minister Boris Johnson and stop him from taking Britain out of the European Union without a deal.

(Reporting by Saqib Iqbal Ahmed; Editing by Sandra Maler)