FOREX-Dollar down broadly, hits 7-1/2-month low vs Swiss franc

Reuters

* Fed taper uncertainty, U.S. budget weigh on dollar

* BoE's Carney says no case for QE at moment

* Yen up after Japan minister remarks on corporate tax rate

* Swiss franc at three-month high versus euro

By Gertrude Chavez-Dreyfuss

NEW YORK, Sept 27 (Reuters) - The dollar fell across theboard on Friday, hitting a 7-1/2-month low against thesafe-haven Swiss franc, as wrangling over the U.S. budget and alack of clarity over when the Federal Reserve will scale backstimulus curbed demand for the greenback.

The dollar also fell against the yen after Japanese FinanceMinister Taro Aso said he was not thinking of lowering theeffective corporate tax rate now. That surprised investors whohad positioned for a weaker yen on expectations of more fiscalstimulus to prop up the economy.

Sterling, meanwhile, rose to $1.6137 against the dollar, a one-week high, after Bank of England Governor MarkCarney was quoted as saying he saw no need for more bond-buyingby the central bank given signs of recovery in the Britisheconomy.

All of these factors pushed the dollar index down 0.4percent to 80.205, not far from a recent seven-month low of80.060 struck after the Fed decided last week to maintain itsbond buying program at $85 billion a month.

The more immediate focus, however, was the looming Oct. 1deadline on the U.S. budget. U.S. congressional officials mustcome up with a deal by that date or risk a government shutdown.

"As this deadline approaches, investors are stepping uptheir sale of dollars on the growing concern that a governmentshutdown will undermine the quality of U.S. assets and lead to aretrenchment in U.S. growth," said Kathy Lien, managing directorat BK Asset Management in New York.

The dollar fell to 0.9018 Swiss franc, its lowestsince early February, with the franc also boosted by solid Swisssentiment data. It was last at 0.9045, down 0.6 percent. Theeuro fell against the franc, dropping to a three-month low of1.2075 francs, hurt partly by rising Italian bondyields.

But the euro rose 0.4 percent against the dollar to $1.3540 .

U.S. House of Representatives Republicans on Thursdayrefused to give in to President Barack Obama's demand forstraightforward bills to run the government beyond Sept. 30 andto increase borrowing authority to avoid a default.

CLOUDY FED OUTLOOK

Beyond the budget impasse and month- and quarter-end flows,investors are focused on Fed meetings in October and December,with some expecting the U.S. central bank to hold off on reiningin stimulus until early 2014 to make sure the U.S. recovery isfirmly on track.

"While we maintain a positive medium-term outlook for thedollar, signs of more definitive upside momentum for thegreenback will have to wait until Washington has overcome itsbudget hurdles and until U.S. economic data suggests that theU.S. economy is sufficiently self-sustaining for quantitativeeasing to be reduced," said Jane Foley, senior currencystrategist at Rabobank in London.

Against the yen, the dollar fell 0.7 percent to 98.31 yen with stop-loss sell orders cited at 98.20. The yen edgedhigher against other currencies as well after Aso's comments.

His comments came after the Kyodo news agency reportedThursday that the Japanese government planned to say it would"urgently consider" cutting the corporate tax rate when itcompiled a stimulus package next week.

The issue of whether Japan will lower the effectivecorporate tax rate has been weighing on the yen, which has slidthis year on the back of Japanese Prime Minister Shinzo Abe'spush to reflate the economy through steps such as aggressivemonetary stimulus and pro-growth structural reforms.

"The government will likely implement some form of fiscalstimulus but clearly it won't include a corporate tax rate cutimmediately," said Derek Halpenny, European head of globalmarket research at Bank of Tokyo Mitsubishi.

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