* Euro falls on market uncertainty ahead of EU summit
* Safe-haven Swiss franc hits record high vs euro, dollar
* U.S. debt ceiling saga adds to investor unease
(Adds details, byline; updates prices)
By Wanfeng Zhou
NEW YORK, July 18 (Reuters) - The euro fell against the dollar and hit a record low against the Swiss franc on Monday and concerns the euro zone debt crisis will worsen looked set to keep the single currency under pressure.
While a stalemate in Washington over raising the nation's $14.3 trillion borrowing limit was also high on investors' minds, most were betting some deal will be reached. That helped support the dollar against major currencies.
By contrast, in Europe, anxiety over a Greek default and contagion risks remained high. Italian and Spanish bond yields rose sharply and the cost of insuring peripheral euro zone debt against default soared to record highs.
Euro zone leaders will meet on Thursday to try to finalize a second round of aid for Greece worth 110 billion euros ($154 billion). Investors feared little progress will be made as officials and bankers remained divided over how to keep the region's debt woes from spreading.
"Considering what Europe is facing and will face, I think the euro might be a little bit overvalued," said Fabian Eliasson, vice president of currency sales at Mizuho Corporate Bank in New York. "I don't see the problem going away anytime soon."
The euro last traded down 0.5 percent at $1.40758
The euro hit a record low of 1.13650 Swiss francs
As Germany presses for significant private sector involvement and the European Central Bank insists it will not accept defaulted bonds as collateral, policymakers are struggling to reach a consensus. For details, see [ID:nL6E7II0FP] <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Lawrence Summers on euro zone risks: [ID:nN1E76G075]
Washington's back up plan on debt: [ID:nN1E76F07L]
Pressure for radical action on Greece: [ID:nL6E7IH099]
Swiss franc is asset of choice amid crises:
http://link.reuters.com/syt62s ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
U.S. DEBT SAGA
The dollar also fell to a record low against the Swiss franc at 0.8034
The franc continues to be the safe-haven of choice as investors seek liquidity and relative safety on concerns about fiscal health in both Europe and the United States.
Negotiations over the U.S. debt ceiling are running dangerously close to an Aug. 2 deadline after which Washington will be unable to pay its bills if the limit is not raised.
The lack of progress has led two ratings agencies to warn of a credit rating downgrade in the event of a U.S. default. Such a move, some traders fear, could send interest rates soaring and erode the U.S. dollar's reserve currency status.
Fitch Ratings on Monday reiterated that if the U.S. debt ceiling is not raised prior to Aug. 2, it will place the AAA rating on watch negative, meaning it could downgrade it within a three- to six-month period. [ID:nLDE76H182]
Although no deal has yet been made, Treasury Secretary Timothy Geithner was optimistic, saying top Republicans had taken "default off the table.
The top Republican in the Senate, Mitch McConnell, submitted a plan that would essentially make Obama the one with the power to raise the debt limit. A vote is planned in the Senate later this week but prospects are uncertain in the House, where the Republicans hold sway.
Boris Schlossberg, director of currency research at GFT in New York, said "the currency market is clearly complacent" about the issue, which is reflected in the euro's move lower against the dollar.
"However, if by the Friday there is no meaningful agreement on plan B and the parties remain far apart, the greenback could see panic selling as fears of possible technical default grip the market," he said. (Additional reporting by Nick Olivari; Editing by Andrew Hay)