* Euro takes back some lost ground after hitting 7-month low
* Long-dollar positions rose even ahead of payrolls data -IMM
By Lisa Twaronite
TOKYO, Nov 9 (Reuters) - The dollar ceded some ground to the euro as investors took profits on Monday, after robust U.S. employment data prompted more investors to bet on an interest rate increase in December.
The euro added 0.3 percent to $1.0768 EUR= , after dropping to a seven-month low of $1.0704 on Friday following a heftier-than-expected rise in U.S. jobs last month underscored expectations of monetary policy divergence, with the Fed seen on track to hike next month.
By contrast, at the last European Central Bank meeting, President Mario Draghi indicated that the ECB was seriously considering expanding its bond purchase programme and perhaps even lowering its already-negative deposit rate.
Still, some investors used the single currency's plunge to take profits on their dollar holdings, and others to buy euros on the dip.
"Demand for euro, in terms of real money, is still high," said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.
The U.S. nonfarm payroll report on Friday showed a rise of 271,000 last month, far exceeding the 180,000 new jobs for October economists polled by Reuters had predicted.
Following the report, 15 of 17 primary dealers, the banks that deal with the Federal Reserve directly, said they expect it to raise rates at its next meeting in December, according to a Reuters poll.
Interest rates futures were pricing in a 70 percent probability that the U.S. central bank will raise borrowing costs next month, according to the CME Group's (O:CME) FedWatch.
U.S. Treasury yields jumped after the payrolls report, with the 2-year yield US2YT=RR marking its highest level in 5-1/2-years. The yield on benchmark U.S. 10-year Treasury notes US10YT=RR rose to 2.339 percent in Asian trading, from its U.S. close of 2.333 percent on Friday.
Even ahead of the robust jobs data, some investors had begun betting on a rate increase. Speculators bolstered bullish bets on the U.S. dollar in the week through Nov. 3, as net long-dollar positions climbed to their highest in more than two months, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday.
The dollar index, which tracks the greenback against a basket of six major rival currencies, rose as high as 99.345 .DXY on Friday, its loftiest peak since mid-April. The euro's rebound brought it down about 0.2 percent on Monday, to 98.995.
But the dollar extended gains against its Japanese counterpart, adding 0.2 percent to 123.37 JPY= , after rising as high as 123.48 earlier in the Asian session, its highest since late August.
The Australian dollar also took back some lost ground, rising about 0.2 percent to $0.7057. Earlier in the session, it dropped as low as $0.7016, its lowest since early October, pummelled by both the upbeat U.S. labour report as well as disappointing Chinese trade figures. The Aussie is a proxy for China plays, as the country is the biggest market for Australia's exports.
Chinese exports slipped 6.9 percent in October from a year earlier, down for a fourth month, while imports fell 18.8 percent, leaving the country with a record high trade surplus of $61.64 billion, the General Administration of Customs said on Sunday.
(Editing by Shri Navaratnam and Richard Borsuk)