* Political crisis in Italy weighs on euro
* Dollar struggles as U.S. shutdown deadline looms
* Euro touches three-week low vs yen, near 5-month lows vs
By Anooja Debnath
LONDON, Sept 30 The euro fell broadly on Monday
as political tensions in Italy escalated, while investors
shunned the dollar as a deadline to avert a government shutdown
in Washington approached.
The Swiss franc and the yen, which tend to benefit in times
of financial uncertainty, rose.
The euro was down 0.7 percent at 131.82 yen having earlier
fallen to a three-week low of 131.385 yen. The single
currency fell 0.2 percent versus the franc at 1.2225,
off a low of 1.2215 francs, its weakest since early May.
It was down 0.3 percent at $1.3488.
The euro was weighed down by an increasingly volatile
Italian political crisis after Silvio Berlusconi pulled his
ministers out of the government on Saturday and called 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 be
limited by month-end and quarter-end euro buying by Asian
accounts and due to dollar weakness as a deadline to break a
political impasse over funding and avert a federal government
"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."
Some Republican legislators are trying to quash President
Barack Obama's healthcare plan by withholding funds to the
The next battle will be over raising the federal
government's borrowing authority and failure to do so by
mid-October may result in a historic debt default.
"It's a scene we've seen before. What's different this time,
though, is that Obama's leadership is in question after flops on
the selection of the Fed's next chief and Syria," said Kyosuke
Suzuki, director of forex at Societe Generale in Tokyo.
The dollar was flat against a basket of currencies at
80.336. 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.
The dollar was down 0.4 percent at 97.83 yen, having
hit a one-month low of 97.53 yen earlier.
The British pound hit a 9-month high of $1.6183 and
8-1/2 month high of 83.38 pence per euro.
The Australian dollar was down 0.1 percent at
$0.9300, having earlier dipped to a two-week trough of $0.9280
after data showed factory activity in its largest export market,
China, grew only slightly.