* U.S. House, Senate pass bill to avert debt default * Dollar index down 0.7 percent, U.S. bond yields down * U.S. currency pulls back from 3-week high against yen By Anirban Nag LONDON, Oct 17 (Reuters) - The dollar fell against a basket of currencies on Thursday as investors marked a deal to end the U.S. debt stalemate by focusing on the economic impact of the government shutdown. Analysts said the two weeks of uncertainty that knocked investor and business confidence would have dented the world's largest economy's growth prospects. That would keep the Federal Reserve from withdrawing monetary stimulus at least until the beginning of next year. As such, U.S. Treasury yields slipped and dragged the dollar down against most major currencies, including the yen. Adding to the dollar's woes was Chinese rating agency Dagong, which downgraded the United States to A- from A and maintained its negative outlook. The dollar index was down 0.75 percent at 79.877, well off a one-month high of 80.754 struck on Wednesday. Against the yen, it lost 0.8 percent to trade at 97.95 yen, pulling back from a three-week high of 99.01 yen set earlier in the day. The dollar lost momentum after rising initially in anticipation of an end to the fiscal impasse, falling to lows versus the yen after the U.S. House of Representatives approved a deal already passed by the Senate. The deal offers only a temporary fix and does not resolve the fundamental issues of spending and deficits that divide Republicans and Democrats. "We would expect this impasse to shave off part of fourth-quarter growth and hurt consumer confidence especially from the government sector," said Simon Derrick, head of currency strategy at BNY Mellon. "What this does is push back expectations of Fed tapering to early 2014 and this is dollar negative." The Fed's Beige Book report on Wednesday suggested confidence had been dampened somewhat by uncertainty caused by budget battles in Washington. CARRY TRADES The dollar's broad losses saw the euro rise 0.7 percent to $1.3638 not far from a eight-month high of $1.36465 struck on Oct. 3. It also pushed growth-linked currencies including the Australian and New Zealand dollars to fresh multi-month highs. The Australian dollar rose past reported option barriers at $0.9600 to hit a four-month high of $0.9603. The New Zealand dollar soared to a five-month high of $0.8467. With implied volatilities - a gauge of how choppy currency moves are likely to be - anchored, and expectations that Fed is likely to keep pumping in dollars at $85 billion a month, analysts said conditions were turning in favour of dollar-funded carry trades. In carry trades, investors borrow in a low yielding currency to buy a higher yielding or riskier one to earn better returns. "With soft but positive economic growth, and investors ever more confident that a Fed exit isn't around the corner, we remain skewed towards selective bullish risk positions," Societe Generale analysts said in a note. "They are a green light for risk takers to position for a recovery of the G-10 carry trade."

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