* Dollar hits record low 0.7997 Swiss francs, 4-mth low vs yen * U.S. deadlock over debt ceiling raises concerns about default * Euro, commodity currencies buoyant as dollar suffers broadly By Nia Williams and Naomi Tajitsu LONDON, July 26 (Reuters) - The dollar fell broadly on Tuesday, hitting a record low against the Swiss franc as investors fretted politicians would fail to strike a deal to raise the U.S. debt ceiling and risk triggering a default that could lead to further dollar losses. The greenback fell as low as 0.7997 francs as options-related barriers were taken out at the psychologically key 0.8000 level, and traders said the dollar could fall "another 2-3 big figures" if U.S. lawmakers are unable to agree on raising the debt ceiling by an Aug. 2 deadline. A warning from President Barack Obama that failure to up the U.S. borrowing limit would severely hurt the nation sparked dollar selling, as the shift in focus to U.S. debt issues tarnished the dollar's safe-haven status. "The market is pricing in a greater probability of a bad outcome - either a default or a rating agency downgrade," said Geoffrey Kendrick, FX strategist at Nomura, who said he expected Washington to miss the Aug. 2 deadline but avoid a default. "Last week the market was a bit complacent on this issue but we have seen the dollar sell off overnight against pretty much everything. Negative headlines could drive it even lower." A debt default would ramp up the cost of U.S. government borrowing and could lead to a loss of faith in liquid U.S. assets as one of the safest destinations for investors, which would trigger more selling in the dollar. In addition to its losses versus the Swiss franc, the dollar suffered against the yen, another safe-haven rival. It fell to 77.88 yen , its weakest since mid-March, when major central banks acted in concert to stem the yen's rise. It pulled back to 78.07 yen as movements calmed in European trade following a volatile Asian session. Given deteriorating dollar sentiment, traders in London said the U.S. currency could test 76.25 yen -- an all-time low hit earlier this year -- in the next week. The dollar's slide has raised concerns Japanese authorities may enter the market to stem yen strength and sources said policymakers are becoming increasingly alarmed by persistent yen rises. BROAD DOLLAR LOSSES The dollar traded at 0.8031 francs, trimming losses but still down 0.4 percent on the day. Traders see the possibility that the U.S. currency could fall as low as 0.7600 francs in the near term, while analysts said the Swiss National Bank was unlikely to enter the market to weaken its currency despite its elevated levels. Also in focus were a series of U.S. Treasury auctions this week, beginning with an offer of two-year notes later in the day. Market participants said weak demand for short-dated paper would offer another cue to sell the dollar. Treasuries have taken a slight hit in past sessions, which has raised yields and expanded the spread between 10-year yields against German ones to around 27 basis points, approaching its widest since March. "We've been seeing a blowout in the spread between Treasuries and Bunds and what that suggests is that the perceived risk between them has widened to the detriment of Treasuries," said Adam Myers, currency strategist at Credit Agricole CIB. But he said the move would be short-lived as U.S. assets were likely to survive the latest shake-up of market confidence with their safe-haven status intact, even if the U.S. can only secure a short-term funding solution to its debt problems. "We should see that spread narrowing and the dollar strengthening again because debt problems in the euro zone are far more difficult to manage because it's a currency union whereas the U.S. is a union of states." he added. The euro traded at $1.4482, having rallied 1 percent on the day to a three-week high around $1.4522 in earlier trade. Gains were checked at that level by resistance from the 61.8 percent retracement of the early May to July sell-off. Against a currency basket , the dollar fell 0.6 percent to 73.638. A fall below 73.506 would mark its lowest in nearly three months. The dollar also depreciated against commodity currencies considered to be higher-risk. The New Zealand dollar clocked a post-float high of US$0.8743, while the Australian dollar rallied to US$1.0955, its strongest since May. The greenback also fell to a 3-1/2 year low of C$0.9419 versus the Canadian dollar. (Editing by Ruth Pitchford)

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