* Political crisis in Italy weighs heavily on euro
* Euro hits three-week low vs yen, 3-month lows vs Swissfranc
* Dollar falls to one-month low on yen as U.S. shutdowndeadline looms
By Ian Chua
SYDNEY, Sept 30 (Reuters) - The euro fell hard in Asia onMonday with Italy in the grip of a fresh political crisis, whileinvestors also sold the greenback as a midnight deadline toavert a shutdown in Washington loomed large.
Both the safe-haven Swiss franc and yen benefited as aresult. The euro fell to a three-week low of 131.38 yen from around 132.78 late in New York on Friday. Itshed 0.3 percent to 1.2218 Swiss francs, reaching atrough not seen since late June.
The dollar slid to a one-month low of 97.53 yen from98.20 late in New York, but managed to outperform the euro,which slipped 0.2 percent to $1.3491.
Investors took aim at the common currency after SilvioBerlusconi pulled his ministers out of the government onSaturday and called for new elections, just seven months afterthe last vote.
The sudden move has forced Italian Prime Minister EnricoLetta to call for a confidence vote on Wednesday.
Letta has a commanding majority in the lower house, and ifhe can gain support from a few dozen senators among dissentingBerlusconi followers or opposition parties, he could form a newgovernment.
Across the Atlantic Ocean, both sides of the politicaldivide are still locked in a bitter debate on a health programmethat has been tied to new government funding measures.
The standoff is a harbinger of the next big politicalbattle: raising the federal government's borrowing authority.Failure to do so by mid-October may result in a historic debtdefault that could cripple the U.S. economy and send shockwavesaround the globe.
"Apprehension is probably the word. The U.S. is stillheading towards shutdown, the Italian government is heading fora confidence vote that probably precedes elections. Farce reignsand risk aversion rises," said Kit Juckes, strategist at SocieteGenerale.
Heightened risk aversion also weighed on commoditycurrencies. The Australian dollar dipped 0.3 percent toreach a two-week trough of $0.9292.
The market's immediate focus will be on HSBC's final reporton China's manufacturing activity data due at 0145 GMT, followedby Beijing's own reading on the sector on Tuesday.
Amid the gloom surrounding Italy and the United States,China has been a bit of a bright spot with recent datasuggesting the world's second-biggest economy has pulled out ofa slowdown.
Any disappointment will only add to the market's risk aversemood.
- Politics & Government