* Political crisis in Italy weighs on euro
* Dollar struggles as U.S. govt shutdown deadline looms
* Euro touches three-week low vs yen, near 5-month lows vs Swissie
LONDON, Sept 30 (Reuters) - The euro hit a five month low versus the Swiss franc on Monday as political tensions in Italy escalated, while investors shunned the dollar as the deadline to avert a government shutdown in Washington approached.
The Swiss franc and the yen, which investors tend to see as a safe haven for their money in times of financial uncertainty, traded close to a 1-1/2 year and one-month peak respectively, against the dollar.
The dollar was down 0.6 percent at 97.63 yen, having hit a one-month low of 97.53 yen earlier. It was flat against the Swiss franc at 0.9054 francs, but not far from the 0.9020 francs hit last week, its lowest since April 2012.
The euro was down 0.8 percent at 131.78 yen having earlier fallen to a three-week low of 131.385 yen. It fell 0.2 percent versus the franc to 1.2218, after hitting a rate of 1.2215 earlier that was its weakest since early May.
Against the dollar it lost 0.3 percent to $1.3488.
Reflecting market nervousness, one-month euro/dollar implied volatility, a gauge of expected price swings and derived from option prices, shot up to around 7.40 vols, its highest since early September, up from 6.50 vols last week.
The euro was weighed down by an Italian political crisis sparked by Silvio Berlusconi's withdrawal of his ministers from the government on Saturday and call for new elections, just seven months after the last vote.
Prime Minister Enrico Letta will seek support in a confidence vote, probably on Wednesday.
Strategists said the euro's fall versus the dollar could, for now, be limited by month-end and quarter-end euro buying and due to dollar weakness as a deadline to break a political impasse over funding and avert a federal government shutdown approached.
"We are in for a risk-off day as we have a bit of a nasty combination of U.S. and Italian political problems," said Arne Lohmann Rasmussen, head of FX research at Danske Bank.
"This is positive for the yen, Swiss franc and sterling. We would not buy the dollar as a government shutdown would reduce the chances of the Federal Reserve 'tapering' its stimulus and that is dollar negative."
The euro could come under further pressure if European Central Bank president Mario Draghi reiterates on Wednesday, when the bank announces its rate decision, that he stands ready to pump more liquidity into the economy if needed.
Analysts at Morgan Stanley said that although they maintain their long euro position they "adopt a cautious approach. Indeed, the focus will also switch to the ECB meeting this week, where a dovish stance is expected," adding that a move above $1.3570 would be needed for further gains towards $1.3710.
In the U.S., a political standoff over public finances looks far from a resolution with Republican legislators sticking to efforts to quash President Barack Obama's healthcare plan by withholding funds from the government.
The dollar was flat against a basket of currencies at 80.291. Latest weekly Commodity Futures Trading Commission data showed currency speculators had cut their bets in favour of the dollar to the lowest net long in seven months.