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Dollar index set for weekly loss

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Bank stocks rebound after losses unnerve investors

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Safe-haven Swiss franc gain and yen flat

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Euro set for biggest weekly gain against dollar in nine

weeks

(Recasts headline and first paragraph, updates prices

throughout, adds fresh analyst quote)

By Chibuike Oguh and Amanda Cooper

NEW YORK/LONDON, Oct 17 (Reuters) - The U.S. dollar was

headed for a weekly loss against the Swiss franc and yen on

Friday, amid concern about trade tensions and unease among some

regional American banks.

The U.S. federal government shutdown has also choked off the

release of key macroeconomic data, leaving investors with less

certainty than usual about what is happening in the economy.

U.S. President Donald Trump said his proposed 100% tariff on

goods from China would not be sustainable, but blamed Beijing

for the latest impasse in trade talks that began with Chinese

authorities tightening control over rare earth exports.

Trump also confirmed he would meet with Chinese President Xi

Jinping in two weeks in South Korea in an attempt to ease trade

tensions.

"There's a bit of safe-haven selling of the dollar," said

Steve Englander, Standard Chartered's global head of G10 FX

research. "I think there's the news on China, which has been

partly but not fully walked back, and the news on regional banks

and credit more broadly are sort of hurting the dollar."

The U.S. dollar fell to its weakest level against the Swiss

franc in a month while the yen erased earlier gains following

Bank of Japan Governor Kazuo Ueda's discussion of factors that

could lead to a rate increase this month.

The dollar fell 0.08% to 0.7925 against the Swiss franc

, dropping to its lowest level since mid-September and was

set for the biggest weekly loss since June.

"The market is responding to a week where we are now 17 days

into a U.S. government shutdown and we're missing initial claims

and the jobs data - we are flying with limited visibility and

the Fed also feels like that," said Amo Sahota, director at

Klarity FX in San Francisco.

"And then we had the trade tension that escalated although

Trump did try to calm things down . . . I believe this is all

game theory and negotiating tactics," Sahota added.

Fed Governor Christopher Waller said he is on board for

another interest rate cut at the U.S. central bank's meeting

later this month because of the mixed readings on the state of

the job market.

The euro was down 0.17% at $1.16678. It was on course

for its biggest weekly gain against the dollar in nine weeks.

The dollar index, which tracks the U.S. currency

against six of its counterparts, headed for a 0.43% slide this

week, although it was up 0.17% on the day to 98.43.

Japan's lower house scheduling committee board has agreed to

hold a parliamentary vote to select the next prime minister on

October 21.

The yen has been on the defensive since fiscal dove Sanae

Takaichi was elected to head Japan's ruling Liberal Democratic

Party this month. But a vote to install her as prime minister

was delayed after a split with the LDP's coalition partner.

Against the Japanese yen, the U.S. dollar was flat at

150.49, on track to notch a weekly loss.

Meanwhile, BOJ Governor Ueda said in Washington on Thursday

that the central bank remains ready to increase its key policy

rate if the likelihood of its growth and price forecasts

materializing increases.

Sterling was down 0.02% at $1.3433, heading for a

weekly gain.