* Dollar index set for weekly loss * Bank stocks rebound after losses unnerve investors * Safe-haven Swiss franc gain and yen flat * 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. (Reporting by Chibuike Oguh in New York; Additional reporting by Rocky Swift in Tokyo; Editing by Shri Navaratnam, Kim Coghill, Timothy Heritage and Deepa Babington)
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