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FOREX-Dollar steady near 13-month lows; data eyed

* Busy data week starting with euro zone inflation

* Short dollar bets rise to highest in more than 4 years

LONDON, July 31 (Reuters) - The dollar held near a 13-month low against a basket of currencies on Monday, weighed down by political uncertainty and increased short positions, but markets were wary of pushing it lower before data due later this week.

Broad market positioning data for the week of July 25 showed short bets against the dollar swollen to their highest levels since a "taper-tantrum" peak in early 2013.

"Our short-term positions indicators are flashing red in terms of extreme bets against the dollar, especially against the euro and the Aussie and in this kind of environment, a small negative surprise in data elsewhere can trigger a washout," said Viraj Patel, an FX strategist at ING in London.

Shorting the dollar has been a popular trade this year as deepening U.S. political uncertainty has kept the greenback on the defensive.

Against the euro, the dollar has weakened more than 11.5 percent so far this year, according to Thomson Reuters data. But with euro zone inflation data on Monday seen well below European Central Bank estimates, a risk for a pull-back is rising.

Central bank policy decisions are also due from Australia and the United Kingdom this week with U.S. jobs data scheduled on Friday.

The dollar index, which tracks the U.S. currency against a basket of six major rivals, rose 0.2 percent to 93.450, trimming some losses after dropping 0.6 percent on Friday. It fell to its lowest level since June 2016 on Thursday.

The pound was little changed at $1.3107 and in close reach of a 10-month high of $1.3159 scaled on Thursday. Sterling has been buoyant against the broadly weaker dollar, supported by hopes that Britain will exit the European Union under a transitional deal.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.bi z / c m s / ? p a g e I d = l i v e m a r k e t s (Reporting by Saikat Chatterjee; Additional reporting by Shinichi Saoshiro in TOKYO; Editing by Andrew Heavens)