* Hedge funds chase eighth rate hike from the Fed this week
* Pound bounces after Friday’s 1.7 percent drop
* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, Sept 24 (Reuters) - The dollar edged higher on Monday, snapping a two-week losing streak, as investors bought the greenback before a widely expected interest rate hike by the U.S. central bank this week while trade war concerns checked investor appetite for risk.
The dollar had struggled as trade war concerns faded and emerging market central banks led by Turkey took aggressive steps to stabilise their markets.
But the weekend brought tensions back into the spotlight and boosted the dollar after Beijing released a white paper on the trade dispute saying it would seek a reasonable outcome, while also describing U.S. tactics as “bullying”.
With the U.S. Federal Reserve set to increase interest rates by a quarter point for the eighth time since late 2015, speculators ramped up bets that interest rate differentials between the United States and other major economies, particularly Europe, will stretch wider.
“We typically see this brief window before a U.S. rate meeting when hedge funds buy the dollar and the trade war headlines are also aggravating that trend,” said Viraj Patel, an FX strategist at ING in London.
Latest positioning data confirms that trend with net speculative long positions on the greenback increasing by its biggest daily rise in more than two months.
The greenback rose 0.1 percent to 94.37 against a basket of its rivals as net long positions for the dollar swelled to $25 billion according to CFTC data.
The euro held at $1.1745, on some relief that German Chancellor Angela Merkel’s ruling coalition resolved a dispute over the country’s scandal-tainted spymaster on Sunday, ending a threat to the six-month-old government.
The pound was the biggest gainer against the dollar in early London trading with the British currency rising half a percent against the dollar above the $1.31 line after latest comments by British Brexit Secretary Dominic Raab.
Raab said on Monday that he was confident that the United Kingdom will make progress and eventually clinch a Brexit deal with the European Union.
Still, investors remained bearish on the British currency with overall short positions rising to a 4-1/2 month high of $6.5 billion, according to latest CFTC data.
Volumes were relatively thin with many Asian centres closed including Japan, China and South Korea. (Reporting by Saikat Chatterjee; Additional reporting by Wayne Cole in SYDNEY; Editing by Alison Williams)