* 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 -IMM
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Ritvik Carvalho and Patrick Graham
LONDON, May 22 (Reuters) - 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 impact.”
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 presidency.
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 November 9.
“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)