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FOREX-Euro slips from 2-1/2 year highs after data

* Euro zone inflation data broadly meets expectations

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

* USD dollar and positioning http://tmsnrt.rs/2hfkGWI

LONDON, July 31 (Reuters) - The euro slipped on Monday, moving away from 2-1/2 year highs, as investors consolidated positions after euro zone inflation data broadly met forecasts, cooling expectations of a rapid withdrawal of policy stimulus in the coming months.

A flash estimate of euro zone inflation showed that consumer price rises in July were level with the month before, standing stable at 1.30 percent and in line with forecasts of economists polled by Reuters. The ECB targets inflation of "just below 2 percent.

"There is nothing in that data to surprise the broader market and there is some profit taking at these levels after the recent rise," said a trader at a U.S. bank in London.

The euro was trading 0.1 percent weaker at $1.1730 and down about 0.4 percent from a January 2015 high of $1.1777 hit last Thursday.

The single currency is the best performer in the G10 FX universe and has gained more than 11 percent against the dollar this year with the bulk of the gains coming in the last three months.

Profit-taking was evident against other currencies as well with the euro declining 0.3 percent against the yen and broadly flat against the sterling

Meanwhile, the dollar held near a 13-month low against a basket of currencies, weighed down by 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.

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.

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, editing by Ed Osmond)