BUZZ-COMMENT-Traders may increasingly see dollar as a safe bet

Jan 14 (Reuters) - Traders may increasingly see the dollar as a safe bet, with its reserve status offering protection that encourages them to gamble during a period of risk aversion stemming from worries about a trade war.

Usually risk averse events discourage gambling but when the asset that speculators are betting will rise is also the world's reserve currency, the worse the situation becomes, the greater the potential demand for dollar.

When this is coupled to a stable outlook for the U.S. interest rate and very bullish techs, it's surprising that traders have not piled into bets on a dollar rise already.

While bullish bets have grown to their largest since May 2019, at $34 billion, there is ample room for growth, especially versus euro where the $8.2 billion short is far smaller than the $31 billion record. The picture for the yen is similar, with the $1.5 billion long a fraction of the $14.5 billion bet held last year.

With traders still short dollars, the situation for the pound and Mexican peso, which have dived in value, is much worse. Big drops for these currencies are likely to spur risk aversion resulting in more demand for dollars.

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(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

((jeremy.boulton@thomsonreuters.com))