* Dollar index inches up but still near 8-month low
* Fed tapering seen unlikely this year
* Tuesday's US payroll data next focus
* China Q3 GDP in line with expectations
By Masayuki Kitano and Hideyuki Sano
SINGAPORE/TOKYO, Oct 18 (Reuters) - The dollar nursed lossesnear an eight-month low against a basket of currencies on Fridayas traders focused on the economic impact of an acrimoniousshowdown in Washington that dragged the U.S. to the brink of adebt default.
The potential damage to the economy from the weeks-longgovernment shutdown could discourage the Federal Reserve fromscaling back its stimulus programme at least until the beginningof next year.
"The markets are driven by expectations that the Fed willhave to maintain its stimulus," said Sho Aoyama, senior marketanalyst at Mizuho Securities.
U.S. Democrats and Republicans reached an 11th-houragreement on Wednesday to break the fiscal impasse. But the dealonly funds the government until Jan. 15 and raises the borrowinglimit through to Feb. 7.
The first wave of U.S. data released on Thursday after thegovernment returned to work was fairly upbeat. But the mainfocus is squarely on the September payrolls report, which theLabor department said will be published on Tuesday.
The dollar index edged up 0.1 percent to 79.728,after having fallen to as low as 79.613 on Thursday, its lowestlevel since early February.
For the week, the dollar index is down about 0.8 percent, ontrack for its biggest weekly decline since mid-September, whenthe Fed shocked markets by keeping its bond-buying stimulusunchanged.
The dollar's fall in the wake of the U.S. fiscal dealpartially reflected the rise in risk-sensitive currencies asexpectations of continued U.S. stimulus helped to boost WallStreet shares, with the S&P 500 index hitting a recordhigh on Thursday.
The euro eased 0.1 percent to about $1.3663, havingset an eight-month high of $1.3682 on Thursday. That was justshy of this year's peak of $1.3711 set in early February.
One point to watch is whether European authorities willexpress concerns about the euro's latest rise against the dollargiven the potential impact on euro zone exports, said a traderfor a Japanese bank in Singapore.
"Officials in countries that are concerned about theireconomies are probably watching with a sense of irritation," thetrader said.
Against the yen, the euro inched up 0.1 percent to 133.97, not that far from a four-year high of 134.95 yen seta month ago.
The dollar struggled to gain traction against the Japanesecurrency after a fall in U.S. bond yields undermined thegreenback's yield allure.
The dollar edged up 0.1 percent on the day to 98.04 yen, but remained below a three-week high of 99.01 yentouched on Thursday.
There was limited market reaction to a spate of Chineseindicators, which were broadly in line with market expectations.Official data showed China's annual economic growth quickened to7.8 percent in the third quarter.
The Australian dollar eased 0.1 percent to $0.9623,hovering near Thursday's four-month high of $0.9647.
- Budget, Tax & Economy