* Dollar index holds close to eight-month low
* Full focus on Tuesday's U.S. payrolls data
* U.S. September existing home sales slip and prices slow
* Labor data seen key to when Fed will begin to taper
By Julie Haviv
NEW YORK, Oct 21 (Reuters) - The dollar gained against the yen on Monday, a day before the release of delayed U.S. government jobs data which could incite debate about when the Federal Reserve will scale back monetary stimulus.
The U.S. Labor Department's release of the September labor market data on Tuesday is more than two weeks late after a political standoff in Washington resulted in a 16-day partial shutdown of the government.
The government's closure is expected to have inflicted enough damage to the economy that markets have concluded the Fed could delay plans to trim its bond buying for several months.
But if the jobs data is solid, then speculation over whether the Fed can taper this year is likely to return, injecting some volatility into the currency market.
Economists forecast that 180,000 jobs were created in September, while the jobless rate is expected to have remained steady at 7.3 percent.
"For now all eyes will turn to U.S. nonfarm payrolls data tomorrow with markets anticipating a print near the 180K level," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York. "If the numbers are close to expectations the greenback could see a relief rebound as the week proceeds."
In early afternoon New York trade, the dollar rose 0.5 percent against the Japanese currency to 98.14 yen, but remained below a near three-week high of 99.00 yen set last Thursday.
The dollar index was up 0.1 percent at 79.698, above a trough of 79.478 touched on Friday, which was its lowest point since February.
While a majority of market players expect the Fed will begin reducing stimulus only next year, a few analysts still believe tapering could start in December.
Those expectations may get a boost if the slew of upcoming U.S. data, including tomorrow's jobs report, indicate the economy gained momentum despite the fiscal stalemate that took the United States close to default.
"If labor markets turn out to be firmer than the consensus and Fed now think, we will see a rapid unwinding of short dollar and long bond positions," strategists at CitiFX, a division of Citigroup, said in a report.
"In the first instance this will hit high-beta G10 and emerging market currencies," the firm said. "Longer term we see some risk that the Fed has to revise downwards its aspirations for labor markets, if structural unemployment turns out to be more significant relative to cyclical slack."
"This would be dollar positive, on the grounds that the Fed would turn out to be more hawkish sooner than investors think," CitiFX said.
Other analysts cautioned that the nonfarm payrolls report may have little impact, if any.
"The Fed cited U.S. fiscal gridlock as a reason to keep QE3 in place in September, and we find that the manifestation of those fears into reality in October will warrant a hold irrespective of tomorrow's NFP (nonfarm payrolls)," said Christopher Vecchio, currency analyst at FXCM-owned DailyFX.com in New York.
Chicago Federal Reserve President Charles Evans said on Monday it will be "tough" for the Federal Reserve to have sufficient confidence in the strength of the U.S. recovery by its meeting in December to start scaling back its bond-buying campaign.
Data gauging the state of the housing market, meanwhile, showed U.S. home resales fell in September and prices rose at their slowest pace in five months, the latest signs higher mortgage rates were taking some edge off the recovery.
The euro was flat at $1.3678, though not far from an eight-month high of $1.3703 touched on Friday and within striking distance of matching the 2013 peak of $1.3711, according to Reuters data.