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FOREX-Dollar falls on worries over possible U.S. government shutdown

* Bit to keep US govt open stokes anti-dollar mood

* Euro hold below 3-year peak versus greenback

* Evidence of reserve diversification drags on dollar

(Updates market action, changes dateline, previous LONDON) NEW YORK, Jan 18 (Reuters) - The U.S. dollar fell on Thursday as traders piled into the euro, yen, sterling and other major currencies amid concerns over a possible U.S. government shutdown as lawmakers struggled to cobble together a federal budget deal. If an agreement to fund government operations, even a temporary one, is not reached by the Friday deadline, it would compound an already-negative climate for the greenback, analysts said. "Politics are sabotaging economics," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York. "It's the uncertainty about the U.S. budget deal. We are going to see further pressure on the dollar if there isn't a deal." Republican lawmakers are scrambling to pass a temporary measure to keep the government open. A House vote on the funding extension is expected after 2:30 p.m. (1930 GMT). At 10:53 a.m. (1553 GMT), the dollar index was down 0.36 percent at 90.590. It held above a three-year low of 90.104 touched on Wednesday. The euro hovered below its three-year peak against the greenback. It was up 0.43 percent at $1.2236. The dollar was down 0.22 percent at 111.03 yen, while the pound was up 0.35 percent at $1.3874. The greenback reversed gains from late Wednesday after Apple Inc. said it would make about $38 billion in one-time tax payments on its overseas cash holdings, though analysts expect the impact on currency markets is going to be limited.

RESERVE DIVERSIFICATION The dollar has fallen since 2017 largely on expectations central banks besides the Federal Reserve are seeking to end the extraordinary measures they adopted to combat the 2008 global financial crisis and the recession that follwed. Another factor analysts are attributing to the greenback's weakness is that global investors, including sovereign wealth funds and central banks, are looking to diversify their dollar holdings into other currencies. China and Japan, the two largest foreign U.S. creditors, cut their Treasuries holdings in November. An analysis of the quarterly data published by the International Monetary Fund of the currency composition of the worlds foreign exchange reserves held by global central banks showed that reserve managers were increasing the pace of adding non-dollar based currencies to their reserves. BNY Mellon strategists said the increase in holdings of pounds and euros in global central banks' reserves over the three quarters ending September 2017 came at the expense of reduced allocation into U.S. dollars.

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Currency bid prices at 10:51AM (1551 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change

Session

Euro/Dollar EUR= $1.2236 $1.2184 +0.43% +2.00% +1.2265 +1.2166 Dollar/Yen JPY= 110.9900 111.2800 -0.26% -1.49% +111.4800 +110.8300 Euro/Yen EURJPY= 135.85 135.60 +0.18% +0.50% +136.3000 +135.4800 Dollar/Swiss CHF= 0.9597 0.9654 -0.59% -1.50% +0.9666 +0.9579 Sterling/Dollar GBP= 1.3875 1.3825 +0.36% +2.69% +1.3890 +1.3806 Dollar/Canadian CAD= 1.2481 1.2434 +0.38% -0.76% +1.2484 +1.2428 Australian/Doll AUD= 0.7986 0.7969 +0.21% +2.37% +0.8005 +0.7942

ar

Euro/Swiss EURCHF= 1.1745 1.1765 -0.17% +0.48% +1.1775 +1.1734 Euro/Sterling EURGBP= 0.8818 0.8810 +0.09% -0.73% +0.8837 +0.8809 NZ NZD= 0.7301 0.7271 +0.41% +3.03% +0.7320 +0.7247

Dollar/Dollar

Dollar/Norway NOK= 7.8287 7.8766 -0.61% -4.61% +7.8932 +7.8218 Euro/Norway EURNOK= 9.5823 9.6033 -0.22% -2.70% +9.6209 +9.5805 Dollar/Sweden SEK= 8.0245 8.0482 +0.10% -2.16% +8.0619 +8.0143 Euro/Sweden EURSEK= 9.8204 9.8104 +0.10% -0.19% +9.8394 +9.8068

(Additional reporting by Saikat Chatterjee in London; Editing