FOREX-Euro,dollar hit by political drama; yen, franc & sterling benefit
* Political crisis in Italy weighs on euro
* Euro hits three-week low vs yen, 4-month lows vs Swiss franc
* Dollar falls to one-month low on yen as U.S. shutdown deadline looms
* British pound hits 8 1/2-month high vs dollar, euro
* Aussie soft after China PMI revised down
SYDNEY/TOKYO, Sept 30 (Reuters) - The euro fell in Asia on Monday with Italy in the grip of a fresh political crisis, while investors sold the dollar as a midnight deadline to avert a shutdown in Washington loomed large.
The Swiss franc, the yen and the British pound all benefited as a result, while soft Chinese economic data undermined the risk-sensitive Australian dollar.
The euro fell to a three-week low of 131.38 yen from around 132.78 late in New York on Friday. It shed 0.3 percent to 1.2202 Swiss francs, reaching a trough not seen since early May.
Against the dollar, the common currency fell slipped 0.2 percent to $1.3491, though it was supported for now by month-end and quarter-end buying by Asian accounts.
Investors took aim at the euro after Silvio Berlusconi pulled his ministers out of the government on Saturday and called for new elections, just seven months after the last vote.
The sudden move has forced Italian Prime Minister Enrico Letta to call for a confidence vote on Wednesday, as he hopes for support from a few dozen senators among dissenting Berlusconi followers or opposition parties.
Across the Atlantic Ocean, some Republican legislators are attempting to defund President Barack Obama's healthcare plan by withholding funds to the federal government.
The standoff is a harbinger of the next big political battle: raising the federal government's borrowing authority. Failure to do so by mid-October may result in a historic debt default that could cripple the U.S. economy and send shockwaves around the globe.
"It's a scene we've seen before. What's different this time, though, is that (U.S. President Barack) 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 slid to a one-month low of 97.53 yen from 98.20 late in New York, though it was cushioned by hopes that Japanese Prime Minister Shinzo Abe might unveil big fresh economic steps on Tuesday to mitigate the impact of a hike in sales tax he is likely to announce on the same day.
The British pound hit a fresh 8 1/2-month high of $1.6183 and 83.38 pence per euro.
Heightened risk aversion also weighed on commodity currencies. The Australian dollar dipped 0.3 percent to reach a two-week trough of $0.9280.
The currency was dented also after HSBC's report on China's manufacturing activity data was revised down sharply, suggesting recovery in China may be still sluggish.