FOREX-Dollar inches up as investors unwind positions after weakest month in a decade

(Updates details and data)
* Dollar index up slightly
* Euro dips against dollar

By Caroline Valetkevitch
NEW YORK, Aug 3 (Reuters) - The dollar was slightly higher
against a basket of currencies on Monday as investors unwound
some recent short positions following the currency's weakest
monthly performance in a decade.
The dollar index, which measures the greenback
against a basket of leading currencies, posted a more than 4%
decline for July, its biggest monthly drop since September 2010.
The weakness has been tied to market expectations for
further easing of U.S. monetary policy and a lack of agreement
among U.S. lawmakers on further fiscal stimulus. Falling U.S.
bond yields have also been cited as a factor.
The day's strength may be tied in part to investors moving
out of short position, strategists said.
"Sentiment was overdone," said Marc Chandler, chief market
strategist at Bannockburn Global Forex in New York. "The swing
in the pendulum of market sentiment hit such an extreme," which
led investors to unwind short positions, he said, but he added
he expects the dollar to resume its trend lower.
The dollar pared gains in the wake of U.S. economic data,
and was only slightly higher by late afternoon New York trading.
U.S. construction spending fell to a one-year low in June.
In a separate report, the survey from the Institute for Supply
Management (ISM) showed U.S. manufacturing activity accelerated
in July to its highest level in nearly 1-1/2 years, but that
hiring at factories remained subdued.
The dollar index hit a session high of 93.997 and was last
up 0.13% at 93.532. The dollar gave back some gains on the data,
Chandler said, adding the market will focus on Friday's U.S.
jobs report.
Speculators' net shorts on the U.S. dollar have soared to
their highest since August 2011 at $24.27 billion, Reuters
calculations and U.S. Commodity Futures Trading Commission data
show.
At the same time, the euro last traded at $1.1760,
down 0.12% on the day.
Sentiment on the euro had improved after European Union
leaders agreed last month to a 750 billion euro ($882 billion)
economic recovery fund while taking on debt jointly in a show of
regional cooperation.
Against the Japanese yen, the dollar gained 0.1% to push
past the 106-yen-per dollar mark.
On Friday, the dollar posted its biggest daily rise against
the Japanese currency since March. The yen had rallied 3% in
July.
On Friday Japanese Finance Minister Taro Aso described the
yen's recent rise as "rapid," signaling concern that a strong
currency could further damage an export-led economy already in
recession.
A growing U.S. fiscal deficit to finance the stimulus
prompted Fitch Ratings to revise its outlook on the United
States' triple-A rating to negative from stable.

========================================================
Currency bid prices at 3:38PM (1938 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR= $1.1760 $1.1774 -0.12% +4.91% +1.1796 +1.1698
Dollar/Yen JPY= 106.0000 105.8800 +0.11% -2.63% +106.4600 +105.5900
Euro/Yen EURJPY= 124.66 124.68 -0.02% +2.22% +125.0600 +124.0200
Dollar/Swiss CHF= 0.9178 0.9127 +0.56% -5.17% +0.9240 +0.9115
Sterling/Dollar GBP= 1.3070 1.3088 -0.14% -1.43% +1.3111 +1.3006
Dollar/Canadian CAD= 1.3389 1.3413 -0.18% +3.10% +1.3450 +1.3380
Australian/Doll AUD= 0.7119 0.7142 -0.32% +1.40% +0.7149 +0.7077
ar
Euro/Swiss EURCHF= 1.0793 1.0755 +0.35% -0.54% +1.0838 +1.0754
Euro/Sterling EURGBP= 0.8997 0.8995 +0.02% +6.42% +0.9014 +0.8983
NZ NZD= 0.6610 0.6632 -0.33% -1.87% +0.6642 +0.6576
Dollar/Dollar
Dollar/Norway NOK= 9.1329 9.0860 +0.52% +4.04% +9.1763 +9.0729
Euro/Norway EURNOK= 10.7424 10.7416 +0.01% +9.19% +10.7861 +10.6923
Dollar/Sweden SEK= 8.7510 8.7680 -0.50% -6.38% +8.8083 +8.7496
Euro/Sweden EURSEK= 10.2930 10.3450 -0.50% -1.68% +10.3515 +10.2877


(Reporting by Caroline Valetkevitch; Additional reporting by
Ritvik Carvalho in London; Editing by David Goodman, Hugh
Lawson, Jonathan Oatis and David Gregorio)