By Dominic Lau
TOKYO (Reuters) - The dollar languished near an eight-month low versus the euro on Friday as investors counted the costs of a two-week U.S. government shutdown, with markets now seeking clues to when the Federal Reserve would begin reducing 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 record high overnight.
U.S. Democrats and Republicans reached an 11th-hour agreement on Wednesday to break an impasse, pulling the world's largest economy from the brink of an historic debt default as the deal funds the government until January 15 and raises the borrowing limit through to February 7.
Analysts said economic weakness resulting from the 16-day shutdown and uncertainty over the next round of budget and debt negotiations may keep the Fed from withdrawing monetary stimulus at least until a few months into next year.
Deutsche Bank said a simple estimate suggested the direct and indirect impact of the shutdown would weigh on the annualised fourth-quarter gross domestic product growth by 0.4 percentage point.
In September, the Fed stunned markets by opting to delay trimming its $85 billion-a-month bond purchases. Stimulus tapering expectations have now been pushed down to December.
"The U.S. dollar is the worst performing currency as attention shifts from the U.S. debt debacle to incoming Fed rhetoric, and bond markets may be leading the way," said Christopher Vecchio, currency analyst at DailyFX.
"The U.S. Treasury yield curve continues to flatten, which typically occurs when either slower economic growth is expected and/or additional monetary easing is forecasted," he added.
The dollar held steady at 98.04 yen after shedding 0.8 percent against the Japanese currency overnight to log its biggest 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-month low at $1.3670 to the euro in early Asian trade on Friday.
Against a basket of major currencies, the dollar hit an eight-month trough on Thursday.
"The Fed's taper decision will ultimately be tied to the economic data - which have been hard to come by since the government shutdown," analysts at Barclays Capital wrote in a note.
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 next Tuesday. The report was originally scheduled for release on October 4.
Ahead of that, global financial markets will focus on China's GDP figures for July-September, due out at 0200 GMT. The world's second-largest economy probably grew at its fastest pace in that three-month period as firmer foreign and domestic demand lifted factory production and retail sales.
Among commodities, gold held near a one-week high at about $1,317.7 an ounce after rallying almost 3 percent overnight - its biggest one-day rise in a month - as the dollar weakened.
U.S. crude prices stood at around $100.8 a barrel, having fallen to their lowest level in more than three months in the previous session as stockpiles in oil hub Cushing began to reverse a months-long decline, and as signs of progress in talks over Iran's nuclear programme also pressured prices.
(Editing by Shri Navaratnam)