* Dollar index struggles near 8-month low
* Tuesday's U.S. payrolls data in focus
* Dollar implied volatility against yen, euro rises
By Anirban Nag
LONDON, Oct 21 (Reuters) - The dollar rose against the yenand the Swiss franc on Monday as some investors positioned for astrong U.S. jobs data reading on Tuesday, which could revive thedebate on when the Federal Reserve will scale back monetarystimulus.
But the U.S. currency was pegged back against the euro, sterling and the higher-yielding Australiandollar, leaving it struggling near an eight-month low against abasket of currencies.
The dollar has been under pressure since the U.S. debtcrisis flared, with disruption from the 16-day governmentshutdown that ended last week leading markets to conclude theFed will delay plans to trim its bond buying for several months.
But the near-term focus was on the September jobs report,which was delayed due to the shutdown. It is forecast to show180,000 jobs were created last month while the jobless rate isexpected to remain steady at 7.3 percent.
If the data beats expectations, then speculation overwhether the Fed can taper this year or not is likely to return,injecting some volatility in the currency market.
The dollar index was flat at 79.663, not far from atrough of 79.478 touched on Friday, its lowest level sinceFebruary. The dollar edged up 0.3 percent against the yen to98.05 yen, inching towards a near three-week high of99.01 yen set last Thursday.
The dollar was 0.2 percent higher against the Swiss franc at 0.9040 francs.
"We forecast non-farm payrolls to increase by 200,000 andthe unemployment rate to decline to 7.2 percent," said ChrisWalker, currency strategist at Barclays. "Results in line withour forecast would likely lead to a broad dollar rally, asexpectations for a taper delay are pared back."
Barclays recommended long dollar positions against the yen.
While a majority of market players expect the Fed will beginreducing stimulus next year, a few analysts still believetapering could start in December.
Those expectations may get if a slew of upcoming U.S. dataheadlined by the jobs report shows the economy gained momentumdespite the fiscal stalemate that took the U.S. to the brink ofdefault.
Some of that uncertainty was reflected in a pick-up inovernight implied volatilities, a gauge of how choppy a currencypair is likely to be. The euro/dollar vols ticked upto around 9.7 percent from around 4.5 percent on Friday.
Implied vols in dollar/yen also rose.
"In the last two months, previous payrolls figures wererevised down. The U.S. economy is losing steam and cannotwithstand tapering," said Daisuke Uno, chief strategist atSumitomo Mitsui Bank.
"There will be disappointment at every Fed meeting for therest of the year, and each time the dollar will weaken."
The Fed has two further policy meetings scheduled this year,on Oct. 29-30 and on Dec. 17-18.
The euro was at $1.3670, not far from an eight-monthhigh of $1.3704 on Friday on trading platform EBS, almosttouching this year's peak of $1.3711. Against the yen, the euroedged up 0.2 percent to 134.055 yen, hovering near afour-year peak of 134.95 set in September.
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