* Euro hovers near 8-month high vs dollar
* Asian shares tick up to near 5-month peak
* Focus turns to Fed after weeks-long government shutdown
By Dominic Lau
TOKYO, Oct 18 (Reuters) - The dollar languished near aneight-month low versus the euro on Friday as investors countedthe costs of a two-week U.S. government shutdown, with marketsnow seeking clues to when the Federal Reserve would beginreducing its stimulus programme.
MSCI's broadest index of Asia-Pacific shares outside Japan ticked up 0.1 percent to a near five-month high.The U.S. Standard & Poor's 500 index closed at a recordhigh overnight.
U.S. Democrats and Republicans reached an 11th-houragreement on Wednesday to break an impasse, pulling the world'slargest economy from the brink of an historic debt default asthe deal funds the government until Jan. 15 and raises theborrowing limit through to Feb. 7.
Analysts said economic weakness resulting from the 16-dayshutdown and uncertainty over the next round of budget and debtnegotiations may keep the Fed from withdrawing monetary stimulusat least until a few months into next year.
Deutsche Bank said a simple estimate suggested the directand indirect impact of the shutdown would weigh on theannualised fourth-quarter gross domestic product growth by 0.4percentage point.
In September, the Fed stunned markets by opting to delaytrimming its $85 billion-a-month bond purchases. Stimulustapering expectations have now been pushed down to December.
"The U.S. dollar is the worst performing currency asattention shifts from the U.S. debt debacle to incoming Fedrhetoric, and bond markets may be leading the way," saidChristopher Vecchio, currency analyst at DailyFX.
"The U.S. Treasury yield curve continues to flatten, whichtypically occurs when either slower economic growth is expectedand/or additional monetary easing is forecasted," he added.
The dollar held steady at 98.04 yen after shedding0.8 percent against the Japanese currency overnight to log itsbiggest one-day percentage drop in a month.
The greenback also lost more than 1 percent against the euro on Thursday. The dollar was steady near an eight-monthlow at $1.3670 to the euro in early Asian trade on Friday.
Against a basket of major currencies, the dollar hitan eight-month trough on Thursday.
"The Fed's taper decision will ultimately be tied to theeconomic data - which have been hard to come by since thegovernment shutdown," analysts at Barclays Capital wrote in anote.
In the coming week, investors will get a slew of U.S.economic data that had been delayed by the shutdown.
All eyes will be on the crucial nonfarm payrolls report nextTuesday. The report was originally scheduled for release on Oct.4.
Ahead of that, global financial markets will focus onChina's GDP figures for July-September, due out at 0200 GMT. Theworld's second-largest economy probably grew at its fastest pacein that three-month period as firmer foreign and domestic demandlifted factory production and retail sales.
Among commodities, gold held near a one-week high atabout $1,317.7 an ounce after rallying almost 3 percentovernight - its biggest one-day rise in a month - as the dollarweakened.
U.S. crude prices stood at around $100.8 a barrel,having fallen to their lowest level in more than three months inthe previous session as stockpiles in oil hub Cushing began toreverse a months-long decline, and as signs of progress in talksover Iran's nuclear programme also pressured prices.
- Budget, Tax & Economy
- government shutdown