By Anirban Nag LONDON (Reuters) - The euro was trading firmer near an eight-month high against the dollar on Thursday, supported by an apparent lack of concern by the European Central Bank about the currency's recent strength. The dollar languished near recent lows against a basket of currencies <.DXY> at 79.843, with most investors and speculators cutting long bets in the greenback as the U.S. government shutdown dragged on. Analysts say a prolonged shutdown would take a toll on the U.S. economy and prompt the Federal Reserve to postpone withdrawing monetary stimulus. That is likely to weigh on the dollar in the near term. The euro was up 0.2 percent at $1.3604, trading close to Wednesday's peak of $1.3623, its highest level since February 4. A jump in Italy's services sector also helped the single currency, coming on the heels of improved political stability after the government won a confidence vote on Wednesday. On a trade-weighted basis too, the euro was trading near highs seen in February before ECB President Mario Draghi flagged concerns about a strong euro and its impact on growth and inflation. Those comments led to a decline in the exchange rate in subsequent months. With the euro now back to February levels, there were expectations that Draghi may talk it down by showing a readiness to offer more long-term loans to banks to keep money market rates from rising. Looser money market conditions and low rates make it less attractive to hold a currency. However, at his press conference after the monthly rate-setting meeting on Wednesday, Draghi appeared to show little concern, sending the euro to an eight-month high of above $1.36, before easing back. "President Draghi's appearance is characterized by what he did not say, with little to contain the euro appreciation trend," said Tom Levinson, currency strategist at ING. "Euro/dollar is primed for a test of its February 1 high at $1.3711, levels the ECB back then was not prepared to accept." The euro has been supported by Italian Prime Minister Enrico Letta winning a confidence vote in parliament on Wednesday after Silvio Berlusconi backtracked on threats to bring down the government. Against the yen, the euro was up 0.5 percent to 132.83 yen, while the dollar added 0.3 percent to 97.70 yen, moving away from the previous day's five-week low of 97.12 yen. While the dollar rose against the yen, it was down against the Swiss franc, trading close to recent 1-1/2 year lows of 0.89925 francs as the franc, considered a safe haven, drew buying on concerns about the U.S. government shutdown. U.S. President Barack Obama met with Republican and Democratic leaders in Congress on Wednesday, but a solution seemed unlikely as both sides dug in for what could be a long stalemate. The standoff comes a few weeks ahead of the next political battle to raise the federal government's borrowing limit. Failure to do this could result in a worst-case scenario of an historic U.S. debt default. "We expect the Swiss franc to remain driven by external factors such as conditions in the U.S.," Manuel Olivari, currency strategist at Credit Agricole said in a note. "Although we expect the U.S. to be able to increase the debt ceiling in time, it cannot be excluded that the partial U.S. government shutdown will remain in place for longer than currently assumed." That, along with expectations that the Federal Reserve will keep policy accommodative, should put downward pressure on dollar/franc, he said.

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