By Steven C. Johnson NEW YORK, July 14 (Reuters) - The dollar hit a record low against the Swiss franc on Thursday and the euro rose a day after Moody's warned the United States could lose its top credit rating if Congress doesn't raise the U.S. debt ceiling. The dollar also hit a four-month low against the yen after the U.S. Federal Reserve hinted Wednesday at further policy easing should the economy worsen, though better-than-expected U.S. unemployment and retail sales data Thursday eased concern and helped the dollar pare its losses. [ID:nN1E76D0A6] Still, traders said the prospect of a U.S. downgrade would make it hard for the dollar to gain much traction, particularly with talks between the White House and Republicans to reach a last minute deal not going well. [ID:nN1E76C007] In a statement, Moody's said it sees a "rising possibility" that the debt limit won't be raised in time to prevent a default on some U.S. Treasury debt obligations. As the Aug. 2 deadline for raising the debt ceiling nears, investors "are going to want to hold other currencies, and that will weigh on the dollar," said Mark McCormick, currency strategist at Brown Brothers Harriman in New York. The euro was last up 0.3 percent at $1.4227 EUR=, well off a four-month low beneath $1.39 hit earlier this week. But lingering worries about the euro zone debt crisis could cap further gains, traders said. The euro retreated from a session high near $1.43 after Italy was forced to pay the highest borrowing costs on record for new 15-year debt.[ID:nL6E7IE0DV] Investors are still worried about European bank exposure to a possible Greek default. French banks are thought to have some of the largest exposure, and price action reflects the unease, with the euro's fortunes waxing and waning in tandem with the share prices of banks such as BNP Paribas (BNPP.PA). "It's really a tug-of-war between the euro and dollar. They're like two lumbering prize fighters just leaning against each other," said David Watt, senior strategist at RBC Capital Markets. "If you want clarity on what people think of both currencies, look at the Swiss franc." Both the euro EURCHF=EBS and dollar CHF=EBS hit record lows against the Swiss currency on Thursday as investor demand for the traditional safe haven remained elevated. The same rush for safer assets boosted the yen, with the dollar hitting a four-month low around 78.45 yen JPY=. It was last unchanged at 79.05 yen. That provoked warnings from Japan's Finance Ministry, with a senior official saying the country could intervene without warning to weaken the currency. [ID:nL3E7ID3ZE] Japan intervened in tandem with other major counties in March following a devastating earthquake and tsunami, but analysts say it would likely act on its own this time. Traders said there may have been some semi-official demand overnight, but investors would treat any rally in the dollar against the yen as an opportunity to sell as Japan has limited success intervening on its own. A strong yen hurts the fragile, export-driven Japanese economy, but investors tend to flock to it in uncertain times as they unwind risky trades financed with borrowed yen. "Swiss franc strength causes discomfort but yen strength causes actual pain," Watt said. "But as long as the global backdrop is one of risk aversion, they will probably have only limited success if they try to stand in the way of yen gains." The New Zealand dollar NZD=D4 hit a 30-year high after better-than-expected economic data increased expectations of a rate increase before year end. It was last up 0.6 percent at $0.8434. [ID:nL3E7I5025] (Additional reporting Nia Williams in London) (Editing by Theodore d'Afflisio)

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