FOREX-Dollar struggles as U.S. budget standoff persists


(Removes reference to CFTC data which cited previous week'snumbers as issued on Friday. CFTC did not release data onFriday)

* Boehner's uncompromising comments raise U.S. debt defaultfears

* Dollar index stuck close to 8-month low

* Safe-haven yen hits 5-week high vs dollar, Swiss franc up0.4 pct

By Anooja Debnath

LONDON, Oct 7 (Reuters) - The dollar traded near aneight-month low against a basket of currencies, falling againstperceived safe havens for investors like the yen and Swiss francas a U.S. budget impasse showed no sign of breaking.

Republican House Speaker John Boehner said on Sunday therewas "no way" Republican lawmakers would agree to a measure toraise the debt ceiling unless it includes conditions to rein indeficit spending.

His comments added to concerns that the U.S. Congress andPresident Barack Obama could fail to reach a deal on raising theceiling by Oct. 17, when the Treasury has estimated it will haveeffectively run out of cash.

Financial investors have refrained from selling the dollarheavily through a week of political paralysis in Washington,trusting that a last minute resolution would still be found toavoid the bigger problems a default would bring.

The currency's status as a refuge for investors has alsobeen undermined by expectations that any damage done to the U.S.economy would be countered by the Federal Reserve sticking withstimulus for longer.

By 0800 GMT on Monday, the dollar index wasdown just 0.1 percent at 79.977, not far from eight-month low of79.627 hit on Thursday.

"There is a great deal of uncertainty over the fiscalsituation in the U.S. and it looks unlikely to be resolved anytime soon," said Lee Hardman, currency economist at BTMU.

"The longer the delay goes on, the greater the potential forthe dollar to weaken further, particularly against the yen.Dollar/yen has the greatest downside potential in the near termgiven that the market is still heavily short the yen."

The greenback was down 0.5 percent against the yen at96.95 yen, having earlier fallen to a five week low of 96.88yen. The pair's 200-day moving average, at 96.68 on Monday, iscited as a key support level.

Reported option expiries at 96.50 yen, 96.75 yen, 97.10 yenwould keep the pair close to its current level.

Osamu Takashima, chief FX strategist at Citigroup GlobalMarket Japan said if the U.S. situation doesn't improve, marketsmay focus on the risk of a U.S. debt default and consider"unwinding of yen short positions... the yen is likely to rise."

"If the dollar falls to around 95 yen, under-hedged Japaneseexporters may try to sell the dollar, further accelerating thedollar's fall."

The dollar also lost 0.4 percent against the Swiss franc to 0.9038 francs, slipping towards a 19-month low of0.89675 set on Thursday.

The euro edged up 0.1 percent and was last at $1.3572, not far from Thursday's eight-month high of $1.36465against the broadly weak dollar.

Although most investors still expect an eleventh-hour dealto raise the debt ceiling and avert a historic debt default, thestandoff has already led to a partial government shutdown andhas raised concerns that the still fragile U.S. economicrecovery is now in jeopardy of being derailed. (Additional reporting by Hideyuki Sano in TOKYO)

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