TOKYO: The dollar was on the back foot against the yen and the Swiss franc in early Asian trade on Monday as the weekend produced little progress in Washington over the US budget standoff, keeping the greenback stuck close to 8-month lows against a basket of major currencies.
Republican House Speaker John Boehner vowed on Sunday that there is "no way" Republican lawmakers will agree to a measure to raise the debt ceiling unless it includes conditions to rein in deficit spending.
The comment raised fear the US congress and President Barack Obama could fail to reach a deal on raising the ceiling by Oct. 17, when the Treasury has estimated it will have run out of cash.
The brinkmanship in Washington kept dollar bulls on the defensive.
The dollar index stood at 80.04 , down slightly on the day and not far from eight-month low of 79.627 hit on Thursday.
Against the yen, it fell 0.3 percent to 97.20 yen, edging near a five-week low of 96.93 yen touched last month.
"If things do not improve, the market may focus on the risk of a US debt default. In that case, considering the possibility of unwinding of yen short positions, the yen is likely to rise," said Osamu Takashima, chief FX strategist at Citigroup Global Market Japan.
"If the dollar falls to around 95 yen, underhedged Japanese exporters may try to sell the dollar, further accelerating the dollar's fall," Takashima added.
Technically, the dollar/yen's 200-day moving average, at 96.68 on Monday, is seen by many as a key support level to watch.
The dollar also fell against the Swiss franc, another safe-haven currency, to 0.9055 franc, down 0.2 percent from late last week and slipping towards a 19-month low of 0.89675 set on Thursday.
The euro also held firm at $1.3569, not far from Thursday's eight-month high of $1.36465 against the broadly weak dollar.
Although most investors still expect an eleventh hour deal to raise the debt ceiling and avert a historic debt default, the standoff has already led to a government shutdown, raising concerns the still fragile economic recovery is now in jeopardy of being derailed.
That has prompted investors to push back expectations that the Federal Reserve will scale back its stimulus, undermining the dollar.
With no major economic data releases planned on Monday, the market's focus will likely be on developments in the US debt situation.
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