FOREX-Dollar slips as no sign of progress in U.S. budget standoff
* Boehner's uncompromising comments raise concerns about U.S. debt default
* Dollar index stuck close to 8-month low
* Dollar/yen may fall below Y95 due to speculators' long positions
* Safe-haven Swiss franc up 0.3 pct
By Hideyuki Sano
TOKYO, Oct 7 (Reuters) - The dollar dropped against the yen and the Swiss franc on Monday as the weekend produced little progress in Washington over the U.S. budget standoff, keeping the greenback stuck close to 8-month lows against a basket of major currencies.
Republican House Speaker John Boehner vowed on Sunday that there is "no way" Republican lawmakers will agree to a measure to raise the debt ceiling unless it includes conditions to rein in deficit spending.
The comment raised fears the U.S. Congress and President Barack Obama could fail to reach a deal on raising the ceiling by Oct. 17, when the Treasury has estimated it will have effectively run out of cash.
The dollar index stood at 80.02 , down slightly on the day and not far from eight-month low of 79.627 hit on Thursday.
As traders who had bought back the dollar before the weekend to close their positions began the week by selling the dollar afresh, the dollar fell 0.4 percent against the yen to 97.07 yen , edging near a five-week low of 96.93 yen touched last month.
"If things do not improve, the market may focus on the risk of a U.S. debt default. In that case, considering the possibility of unwinding of yen short positions, the yen is likely to rise," said Osamu Takashima, chief FX strategist at Citigroup Global Market Japan.
"If the dollar falls to around 95 yen, underhedged Japanese exporters may try to sell the dollar, further accelerating the dollar's fall," Takashima added.
Technically, the dollar/yen's 200-day moving average, at 96.68 on Monday, is seen by many as a key support level to watch.
The dollar also fell against the Swiss franc, another safe-haven currency, to 0.9042 franc, down 0.3 percent from late last week and slipping towards a 19-month low of 0.89675 set on Thursday.
The euro also held firm at $1.3571, not far from Thursday's eight-month high of $1.36465 against the broadly weak dollar.
Although most investors still expect an eleventh-hour deal to raise the debt ceiling and avert a historic debt default, the standoff has already led to a government shutdown, raising concerns the still fragile U.S. economic recovery is now in jeopardy of being derailed.
Should there be no deal by Oct. 17, analysts think the Treasury is still likely to opt to make good on its debt and interest payments to avoid a meltdown in financial markets -- but at a greater cost.
In such a case, Washington would have to radically slash and delay other spending, which should surely damage the economy far more than shutting down national parks and stalling medical research projects.
The brinkmanship in Washington has prompted investors to push back expectations that the Federal Reserve will scale back its stimulus, undermining the case for dollar bulls.
The government shutdown also delayed the release of economic data, including September U.S. payrolls data, originally due on Friday, which would be one of the most important data to gauge the strength of a recovery in the U.S. job market.
"If we can't have data to look at, nothing can go forward," said a frustrated currency trader at a Japanese bank.
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