* Dollar index pinned to 11-month lows
* August 2015 high above 1.17 per dollar in sight
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, July 21 (Reuters) - The euro jumped to its highest levels in nearly two years against the dollar on Friday as the single currency's bounce this week prompted some investors to cover short positions.
The euro's 0.3 percent vault above $1.1650 in early trading on Friday meant that those holding currency options betting on a fall in the single currency after the European Central Bank's meeting on Thursday faced heavy losses.
The next target level for the euro was an August 2015 high at $1.17150, according to strategists.
The euro rose to $1.16765 as markets bet the European Central Bank would tweak its policy stimulus in the autumn, although ECB President Mario Draghi was careful to give few hints about the bank's next move after Thursday's policy meeting.
"There is really nothing in Draghi's remarks yesterday that calls for this kind of bullishness on the euro and markets may end up getting disappointed before long," said Adam Cole, head of G10 FX Strategy at RBC Capital Markets in London.
The euro's strength pushed the dollar to an 11-month low of 93.994 against a trade-weighted basket of other major currencies.
U.S. President Donald Trump's failure to garner enough support for his healthcare bills in the Senate this week also weighed on the dollar, as it raised concern about similar obstacles in passing his stimulus and tax reform agendas.
The dollar was broadly flat against the yen at 111.79 after touching an overnight low of 111.48, its lowest since June 27. It was on track to shed 0.4 percent for the week.
The dollar's losses against the yen were mitigated by market expectations that the Bank of Japan will keep its massive stimulus programme in place far longer than other major central banks amid stubbornly weak inflation.
The Australian dollar plunged after a top central banker said on Friday that the Reserve Bank of Australia doesn't need to follow the leader when it comes to global monetary tightening.
The Aussie fell 0.8 percent to $0.7893 after falling as low as $0.7875 earlier.
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 Saikat Chatterjee; Additional reporting by Lisa Twaronite in TOKYO; Editing by Hugh Lawson)