FOREX-Dollar on the ropes as U.S. budget fears weigh
* Dollar slips as U.S. gov't shutdown concerns leave traders wary
* Solid Germany, Italy confidence data boosts euro
* Euro gains seen limited due to ECB policy uncertainty
By Gertrude Chavez-Dreyfuss
NEW YORK, Sept 25 (Reuters) - The dollar fell on Wednesday after four straight sessions of gains, weighed down by worries about budget gridlock in Washington that could lead to a U.S. government shutdown next week.
Congressional officials must reach a budget deal by Monday that would allow the government to keep running, but negotiations have been contentious so far.
There is also an approaching deadline for lawmakers to raise the nation's $16.7 trillion debt limit by mid-October, and once again U.S. politicians are deeply divided on how to extend the Treasury's borrowing authority.
"The risk of a failure to extend America's borrowing ability could potentially result in a default on the nation's debt, a scenario that could do irreparable damage to international investor confidence in dollar assets," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
In midday trading, the dollar was down 0.3 percent against a basket of currencies to 80.314.
A lack of clarity over how long the U.S. central bank will delay scaling back stimulus has also weighed on the dollar.
The euro traded up 0.4 percent at $1.3529, not far from last week's high of $1.3569, hit after the Federal Reserve's surprise decision to keep its bond-buying stimulus intact. Traders reported strong chart support at $1.3450.
Against the yen, the euro climbed 0.4 percent to 133.49.
Europe's common curency was helped by data showing consumer confidence in Germany at a six-year high and consumer morale in Italy at its strongest in over two years.
However, the euro's gains were expected to be limited by concerns about the possibility of monetary easing after European Central Bank President Mario Draghi this week spoke of the possibility of providing more cheap long-term loans.
The dollar was little changed against the yen at 98.72 yen , although it rose against higher-yielding and riskier currencies as investors grew wary about the showdown in Washington.
The Australian dollar was down 0.1 percent at US$$0.9385, while the New Zealand dollar - also pressured by a widening of the country's trade deficit - fell 0.2 percent to US$0.8264.
A U.S. durable goods report for August came in slightly higher than expected on Wednesday, with the headline number rising 0.1 percent, compared with expectations for a flat reading.
Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York, thinks the data does not point to an acceleration of economic activity at this stage.
"The report argues in favor of the FOMC's recent decision to await further data points that might indicate sustainability of demand," he said.
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