By Shrutee Sarkar and Rahul Karunakar
(Reuters) - The U.S. dollar will rise modestly in the year ahead with risks skewed to the upside on renewed speculation that the Federal Reserve will raise interest rates soon, according to foreign exchange strategists polled by Reuters.
Speculators cut bets in favor of the dollar through August, but the U.S. currency <.DXY> rose this week, hitting a three-week high against a basket of currencies on Wednesday, after a host of Fed officials, including Chair Janet Yellen, revived near-term rate hike prospects.
Traders are waiting for official August jobs data due for release on Friday to see if the U.S. labor market is strong enough to justify the Fed's tighter monetary policy stance, although relatively subdued inflation also remains an obstacle.
Expectations for the timing of a Fed rate hike have see-sawed, sending the dollar down almost 3 percent this year after making near double-digit gains in calendar 2015 and 2014.
Still, the poll of over 70 strategists taken this week showed the euro <EUR=> is forecast to weaken 3 percent against the dollar in a year from Thursday's $1.11.
The single currency is forecast to slip to around $1.10 in a month, to $1.09 in three and then further to $1.08 in a year.
Although that consensus is almost unchanged from last month, a slim majority of strategists now say the risk is that the dollar gains much more than predicted, even as an unusually dramatic race to capture the White House looms in November.
Just last month, a majority had forecast the risks to their dollar forecasts were skewed more to the downside.
"Jackson Hole delivered a further rise in the market's confidence that the Fed will hike rates this year. That doesn't mean the Fed will actually do anything of course - they and the market have cried wolf before," said Kit Juckes, global strategist at Societe Generale, referring to the Fed's conference this past weekend in Wyoming.
"But the scene is set for the summer calm to be interrupted by much Fed speculation along with an increased focus on the U.S. presidential election. Still, I'm getting a slightly stronger dollar out of all this, which is something. Not an earth-shattering move..., but my bias remains to be bullish."
While downside risks remain for the dollar in the run-up to the November election, a smaller sample of strategists who answered an extra question said the U.S. currency would benefit most if Democratic Party candidate Hillary Clinton is voted president. She currently leads in nearly all opinion polls.
But for broad dollar moves, the focus is on the timing of a Fed rate hike, as most other major central banks are expected to stick to expansive monetary policy.
The Bank of Japan is widely expected to ease further this month when it reviews its stimulus program, as the economy barely grew in the quarter through to June and inflation is nowhere close to the central bank's 2 percent target. [ECILT/JP]
What has also not helped is the yen's strength against the dollar - it is up almost 14 percent this year - despite extraordinary measures such as a negative interest rate and ongoing massive asset purchases from the BoJ.
But the latest poll still shows the yen is expected to weaken close to 4 percent against the dollar from Thursday's 104. The currency is predicted to weaken against the dollar to 102 in a month, 103 in three months and to 108 in a year.
Those expectations are similar to last month's poll but conflict with positioning data from the Commodity Futures Trading Commission, which showed speculators increased their bets in favor of the yen to the highest since early July.
Bets against the British pound have set record highs for six straight weeks.
Still, the latest poll showed sterling's steep slide of over 10 percent since Britain voted in June to quit the European Union has mostly run its course and now is expected to weaken only slightly over the coming year. [GBP/POLL]
The pound is forecast to fall close to 4 percent over the next six months from Thursday's $1.32. It is then expected to trade at $1.29 in a year.
"With many negatives in the price already, we doubt that GBP will drop through recent lows against USD and EUR," wrote Valentin Marinov, head of G10 FX strategy at CA-CIB, in a note to clients.
(Analysis by Sujith Pai; Polling by Sarmista Sen and Khushboo Mittal; Editing by Ross Finley/Mark Heinrich)