* Euro underpinned by Draghi's comments at weekend * China PMI falls at slower pace, but still contracts * Speculators' long dollar positions rise in last week By Anirban Nag LONDON, Nov 2 (Reuters) - The euro climbed on Monday, holding above $1.10 against the dollar, drawing support from higher German Bund yields after some investors judged ECB President Mario Draghi's weekend comments on monetary policy as fairly balanced. Another senior ECB official, Ewald Nowotny, chimed in by telling a newspaper that while the central bank was right in thinking of stepping up asset purchases to boost inflation, it should think very carefully before doing so. The single currency was also helped by data from the euro zone which, although sluggish, showed some signs of improvement. Markit (NasdaqGS: MRKT - news) 's final manufacturing Purchasing Managers' Index for the euro zone was at 52.3 last month, only slightly up from the September and preliminary October reading of 52.0. In a morning note, Morgan Stanley (Xetra: 885836 - news) analysts said it appeared that Draghi had stiffened the bank's policy stance by saying that more stimulus in December was an open question. Last month, the ECB flagged the chances of further policy stimulus by expanding its "quantitative easing" bond-buying programme and cutting its deposit rate further below zero in December. "We regard this statement as part of an expectation-management exercise in order to maintain parts of the surprise element should the ECB cut its deposit rate in December," the U.S (Other OTC: UBGXF - news) . investment bank said. The euro rose 0.15 percent to $1.1020 and 0.1 percent against the yen to 132.85 yen. The dollar was flat against the yen at 120.62 yen while the index was down 0.1 percent at 96.85. "The weekend comment from Draghi was a bit more balanced and neutral than before, which is triggering some short-covering in the euro," said Yujiro Goto, a currency analyst at Nomura. "The data from China is also disappointing and we are seeing a bit of risk aversion because of that." China's manufacturing sector unexpectedly contracted in October for a third straight month, an official survey showed on Sunday. A private factory survey on Monday also showed activity fell for an eight consecutive month in October. Dollar bulls are likely to stay cautious until the U.S. non-farm payrolls report on Friday. The Federal Reserve held interest rates near zero last week but signalled that a December rate rise remained in play. Data released on Friday by the Commodity Futures Trading Commission showed the value of the dollar's net long position jumped to $21.6 billion in the week ended Oct (HKSE: 3366-OL.HK - news) . 27, from $13.32 billion the week before. That was the largest net long position since late September, after declining for three straight weeks. (Editing by Mark Trevelyan)

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