* Dollar hits 4-1/2-week high vs euro
* Bernanke dashes hopes about U.S. rate hike
* Dollar falls more than 1 percent vs yen (Recasts, updates prices, adds quote, changes byline)
By Steven C. Johnson
NEW YORK, Dec 7 (Reuters) - The dollar hit its highest level against the euro in more than a month on Monday, though it gave up some of those gains after Federal Reserve Chairman Ben Bernanke warned that the U.S. recovery remains fragile.
Data on Friday showing the U.S. economy lost far fewer jobs than expected in November pushed the dollar higher and had markets betting U.S. interest rates could rise by mid-2010.
That momentum carried over into Monday, but Bernanke doused some of the optimism when he said the Fed still expected low rates for an extended period as the economy recovers slowly and endures a persistently high jobless rate. Bernanke spoke to a group of economists on Monday.
For his remarks, click on [ID:nN07169826].
"Bernanke is emphasizing the weakness and the downside to the U.S. economy," said Brian Dolan, chief currency strategist, at Forex.com in Bedminster, New Jersey. "Therefore, he's postponing interest rate hike expectations. He left a very clear impression that rates will remain on hold."
The euro was last trading at $1.4810
An index of the dollar against six major currencies edged down 0.2 percent to 75.772 <.DXY> after earlier hitting 76.183, its highest level in more than four weeks.
The dollar has lost more than 14 percent since its March high, and even after the last two days of gains, traders said sentiment remained fragile. Some traders said declines in the euro should be viewed as buying opportunities.
The euro hit a 2009 high above $1.5140 last month and an all-time high above $1.60 in mid-2008.
The euro showed little reaction to news of an unexpected fall in German manufacturing orders for October, with analysts saying this was partially offset by an upward revision to September's data. [ID:nGEE5B60X9].
Euro investors also showed little reaction to comments from European Central Bank President Jean-Claude Trichet, who said the euro area economy is showing increasing signs of recovery. [ID:nGEE5B6173]. [ID:nGEE5B61E5].
Yen strength on Monday was mostly a technical affair, analysts said, tied to a reversal after the dollar's 2.5 percent gain against the Japanese currency on Friday.
Year-end repatriation flows were also said to be boosting the dollar, analysts said, and there may be more of that ahead. Data last week showed speculators had increased bets versus the dollar in the week ended Dec. 1 to the most since at least June 2008, CFTC data showed on Friday. [ID:nN04176803]
"We continue to expect a period of dollar strength over the coming days and weeks," strategists at Citigroup wrote Monday in a note to clients and suggested investors go short the euro with a target of $1.41.
Longer term, the bank still favors the euro over the dollar. (Additional reporting by Gertrude Chavez-Dreyfuss and Nick Olivari in New York; Editing by Kenneth Barry)