* Euro hits fresh 6-month high on Merkel comments
* Dollar wallows near 6-month lows
* Euro net long positioning rises to highest in over 3 years
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Ritvik Carvalho and Patrick Graham
LONDON, May 22 The euro surged in morning trade
in Europe on Monday after German leader Angela Merkel pointed to
a weak euro and extremely loose monetary policy as causes of
Germany's large trade surplus.
The comments played into market speculation that German
officials at the European Central Bank may push hard for a
tightening of its monetary policy rhetoric and stance this year.
That helped the single currency bounce by around half a cent
from day's lows around $1.1160. By 1050 GMT, it was
trading at $1.1232, up 0.2 percent on the day.
"It did have an impact on the euro (but) one does have to
bear in mind that she did state the obvious," said Manuel
Oliveri, a strategist with Credit Agricole in London.
"The ECB's monetary policy stance is targeting the euro zone
as a whole, so it's no surprise that Germany is in a better
position as compared to other euro nations. From that point of
view her comments should not ... have a sustainable currency
Earlier trade in Europe had seen the dollar recover from its
worst week in over a year against the basket of currencies used
to measure its broader strength.
The greenback has sunk since President Donald Trump's firing
of FBI Director James Comey sparked uproar in Washington and a
rise in the odds on betting markets that he would not see out
the term begun in January.
Trump's departure on a trip to the Middle East seemed to
have cooled the temperature briefly on the political drama in
Washington which market more prosaically fear will derail his
efforts to deliver tax reform and fiscal stimulus, if not his
But the rise in political tensions has coincided with a
worse run of U.S. data that has undermined market expectations
of further rises - or at least the scale of them - this year,
weakening the greenback's relative appeal.
St. Louis Fed President James Bullard said on Friday that
the U.S. central bank's expected plans for rate increases may be
too fast for an economy that has shown recent signs of weakness.
The dollar index, which tracks the greenback against a
basket of six major rivals, fell 0.1 percent on the day after
Merkel's comments to trade at 97.011, its lowest since
"We're still keeping our expectation of a June (rate) hike,
but the impact of expectations of higher rates on forex could be
limited because of the political moves," said Harumi Taguchi,
principal economist at IHS Markit in Tokyo.
"And in the meantime, Europe is emerging as a bright spot in
the global economy," she said.
Net long positioning on the euro rose to its highest in more
than three years in the week ended May 16, according to
calculations by Reuters and Commodity Futures Trading Commission
data released on Friday.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Reporting by Ritvik Carvalho; additional reporting by Tokyo
Markets team; Editing by Toby Chopra)