By Dominic Lau
TOKYO (Reuters) - Asian markets look set for a cautious start to the week on Monday, with U.S. stock futures and the dollar coming under pressure as politicians in Washington showed no signs of making progress over the weekend in resolving the U.S. budget standoff.
Democrats and Republicans remained far apart in ending the first government shutdown in 17 years, let alone reaching a deal on the U.S. borrowing limit by Oct 17 to avoid an unprecedented debt default.
Republican House Speaker John Boehner vowed on Sunday not to raise the U.S. debt ceiling without a "serious conversation" about what is driving the debt, while Democrats said it was irresponsible and reckless to raise the possibility of a default.
The comments appeared to mark a hardening stance since late last week when Boehner was reported to have told Republicans privately that he would work to avoid default, even if it meant relying on the votes of Democrats, as he did in August 2011.
The U.S. Standard & Poor's 500 e-mini futures shed 0.5 percent in early Asian trade on Monday. The S&P 500 index (.SPX) ended down 0.1 percent last week.
U.S. Treasury futures added 5-1/2 ticks.
Selling in risky assets has been orderly so far, but investors see volatility rising if the shutdown continues as the Oct 17 deadline gets closer.
"As the days tick by and the U.S. government's cash gradually starts to run out, the stakes will rise considerably," analysts at ANZ said in a note.
Asian shares were likely to face another testing week after Japan's Nikkei share average (NIK:^9452) tumbled 5 percent last week to mark its worst weekly decline since early August.
Australia's S&P/ASX 200 index (.AXJO) was flat in a tentative start to the session.
"A higher risk of a U.S. sovereign default would lead to a flight to liquidity and, ironically, a stronger U.S. dollar, except against the most liquid/safest-have ones: euro, yen, sterling and Swiss franc," analysts at Barclays Capitals wrote in a note.
"That is not to say we expect a breach of the ceiling, and continue to expect that a resolution will be found, despite the brinkmanship."
The dollar slipped 0.3 percent to 97.18 yen, giving up its gains on Friday to snap a five-day losing run against the Japanese currency.
The greenback was down 0.1 percent against the euro at $1.3571. Against a basket of major currencies, the dollar (.DXY) eased 0.1 percent, within striking distance of an eight-month trough hit last week.
Safe-haven gold inched up 0.3 percent to about $1,314 an ounce.
Brent crude eased 0.3 percent to around $109.10 a barrel after gaining 0.8 percent last week to end a three-week losing run.
(Editing by Shri Navaratnam)
- government shutdown