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I have added a background image as a custom watermark to a Microsoft Word document by opening Watermark in the Page Background group under the DESIGN tab and Selecting Custom Watermark…. But having done that I cannot find any repositioning tools. Is it possible to reposition the background custom watermark image in Microsoft Word 2013, and if so how?

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I don't have Word 2013 but my guess is all the options for adjusting will be in the Printed Watermark dialog that opens when you click the Custom Watermark option. In 2007 your options are very limited. You can adjust the scale of a pic and basic orientations for text. You'll probably have to set up the art or text you want for a watermark outside word, save it in an image file, and then use the Word "Picture watermark" option.

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