FOREX-Dollar struggles as U.S. budget standoff persists
* Boehner's uncompromising comments raise U.S. debt default fears
* Dollar index stuck close to 8-month low
* Safe-haven yen hits 5-week high vs dollar, Swiss franc up 0.4 pct
LONDON, Oct 7 (Reuters) - The dollar traded near an eight month low against a basket of currencies, falling against perceived safe havens for investors like the yen and Swiss franc as a U.S. budget impasse showed no sign of breaking.
Republican House Speaker John Boehner said on Sunday there was "no way" Republican lawmakers would agree to a measure to raise the debt ceiling unless it includes conditions to rein in deficit spending.
His comments added to concerns that 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.
Financial investors have refrained from selling the dollar heavily through a week of political paralysis in Washington, trusting that a last minute resolution would still be found to avoid the bigger problems a default would bring.
The currency's status as a refuge for investors has also been undermined by expectations that any damage done to the U.S. economy would be countered by the Federal Reserve sticking with stimulus for longer.
By 0800 GMT on Monday, the dollar index was down just 0.1 percent at 79.977, not far from eight-month low of 79.627 hit on Thursday.
"There is a great deal of uncertainty over the fiscal situation in the U.S. and it looks unlikely to be resolved any time soon," said Lee Hardman, currency economist at BTMU.
"The longer the delay goes on, the greater the potential for the dollar to weaken further, particularly against the yen. Dollar/yen has the greatest downside potential in the near term given that the market is still heavily short the yen."
The greenback was down 0.5 percent against the yen at 96.95 yen, having earlier fallen to a five week low of 96.88 yen. The pair's 200-day moving average, at 96.68 on Monday, is cited as a key support level.
Reported option expiries at 96.50 yen, 96.75 yen, 97.10 yen would keep the pair close to its current level.
Latest weekly Commodity Futures Trading Commission data released on Friday showed that net yen short positions, or bets the yen will weaken further, rose, while currency speculators pared their bets in favour of the dollar.
Osamu Takashima, chief FX strategist at Citigroup Global Market Japan said if the U.S. situation doesn't improve, markets may focus on the risk of a U.S. debt default and consider "unwinding of yen short positions... the yen is likely to rise."
"If the dollar falls to around 95 yen, under-hedged Japanese exporters may try to sell the dollar, further accelerating the dollar's fall."
The dollar also lost 0.4 percent against the Swiss franc to 0.9038 francs, slipping towards a 19-month low of 0.89675 set on Thursday.
The euro edged up 0.1 percent and was last at $1.3572 , 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 partial government shutdown and has raised concerns that the still fragile U.S. economic recovery is now in jeopardy of being derailed.