* Dollar index hits highest since Fed. 3
* Market sees around 70 pct chance of Fed hike in December
* Trump victory in U.S. election would delay Fed hike
* Speculators raise dollar-long positions -IMM data
By Jemima Kelly
LONDON, Oct 24 (Reuters) - The dollar hit a nine-month high against a basket of currencies on Monday, buoyed by expectations that the Federal Reserve will raise U.S. interest rates this year and that Donald Trump will not become the U.S. president.
After three straight weeks of gains, the dollar index - which tracks the greenback against a basket of six major currencies - rose as high as 98.846 in early trade on Monday, its strongest since Feb. 3.
On Friday, San Francisco Fed President John Williams said that “it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later”.
His comments followed recent hawkish talk from other central bank officials, including New York Fed President William Dudley and Fed Vice Chair Stanley Fischer, which has led investors to price in around a 70 percent chance that the Fed will raise rates in December, according to CME FedWatch.
Analysts said the dollar had also got a boost from recent opinion polling before the Nov. 8 U.S. presidential election, which has favoured Democratic candidate Hillary Clinton over the Republican Trump.
“If there’s greater confidence that Clinton will win it, there’s greater confidence that the Fed will move in December,” said Bank of New York Mellon currency strategist Neil Mellor, in London.
Retail broker Saxo Bank said on Monday that it was increasing its margin requirements on certain currency pairs in the run-up to the U.S. elections, anticipating volatile and illiquid trading conditions. It is now asking investors to lodge 15 percent up front on bets on the Mexican peso.
Options positions on the U.S. stock market suggested investors are pricing in a Clinton victory. Positioning data on options tied to the benchmark S&P 500 index showed little new demand for contracts providing insurance against a major drop in stock prices after the election.
Analysts said disappointing U.S. growth figures might lead investors to pare their expectations of a December hike.
Speculators raised their bets on the U.S. dollar for a fourth straight week in the seven days up to last Tuesday, with net long positions hitting their highest since late January, Reuters calculations and data from the Commodity Futures Trading Commission showed on Friday.
“The dollar’s firm - it’s not going to fall sharply in the near term. And I would suspect that if we get even more certainty on the U.S. elections, it will strengthen a little bit further,” said BMO Capital Markets currency strategist Stephen Gallo, in London.
The euro inched up 0.1 percent to $1.0896, close to Friday’s trough of $1.0859, its lowest since March 10.
The European Central Bank kept interest rates at historic lows last Thursday and ECB President Mario Draghi kept the door open for more stimulus, quashing speculation that the bank was poised to taper its 1.7 trillion-euro asset-buying programme .
For Reuters new 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 (Additional reporting by Tokyo markets team; Editing by Larry King)