Hedge funds cut dollar short positions Speculators are cutting bets the dollar will weaken as investors take risk off the table amid increasing uncertainty over the outcome of the US election and the effect it will have on global stock markets. Hedge funds further reduced their short positions on the dollar last week, according to data from the US Commodity Futures Trading Committee that is used as a proxy for short-term speculators in the world's largest financial market. The moves came as currency investors said they were preparing to buy the US dollar if the Republican party took control of the White House on Tuesday, with a Romney victory being viewed as positive for the dollar due to the Republican contender's dislike of monetary easing. "If Mitt does win, a few guys that I talk to, including myself, will be aggressively buying the dollar," said Bob de Groot, head of spot forex trading at BNP Paribas. The dollar surged on Friday following signs of an economic recovery in the US, after job figures for October were stronger than expected. Yet traders said that an Obama victory was still widely priced into the markets, with speculators still betting the dollar was more likely to fall than rise. Volatility has fallen across financial markets in the lead-up to the US election as many market participants have preferred to wait for the outcome of what is seen as an increasingly hard to predict battle. Investors at Barings Asset Management and Amundi said they had decided not to bet either way on the outcome of the election due to the uncertainty. Currency investors have found the dollar confusing to trade in recent weeks, after a fresh bout of monetary easing from the US Federal Reserve in September failed to spark a weaker dollar. But traders said a Romney victory was more likely to bring investors back into the markets as it was the less likely outcome. Mark Johnson, global head of forex cash trading at HSBC, said: "From a markets perspective, a Romney victory will be much more interesting than an Obama victory. An Obama victory will mean business as usual and we know what to expect. With a Romney victory, there will be a difference of opinions. More investors have bet the US dollar would fall than rise since the end of August, when markets moved to price in a third round of monetary easing by the Fed, which it announced in mid-September. Yet bets the dollar would fall have been gradually cut for the past month, as the dollar has remained strong in the run-up to the election. But some investors now believe the currency could rise along with equities in the event of a Republican victory, reversing its normal pattern of falling when US equities rise. On Monday, the dollar was up 0.2 per cent against the euro at $1.2791. Against a basket of currencies the dollar added 0.2 per cent.