* Deal on U.S. debt ceiling elusive, negotiations continue
* Yen edges higher, dollar/yen off Friday's near 2-wk high
By Masayuki Kitano and Naomi Tajitsu
SINGAPORE/WELLINGTON, Oct 14 (Reuters) - The dollar fell onMonday while the yen rose on safe-haven demand due to concernsthe United States may default on its debts as lawmakersnegotiate a deal to raise its borrowing facility ahead of adeadline this week.
The dollar was last down 0.3 percent at 98.31 yen,having touched a low of about 98.05 yen earlier in the day. Thegreenback retreated from a near two-week high of 98.60 yen seton Friday.
Senate negotiations to bring a simmering fiscal crisis to anend showed signs of progress on Sunday, but there were noguarantees that a historic default would be avoided.
Negotiations that were likely to stretch into the weekcontinued between the Senate's top Democrat and Republican.
Failure to break the stalemate before Thursday, the deadlineto raise the debt ceiling, would leave the world's biggesteconomy unable to pay its bills in the coming weeks, potentiallyhaving a catastrophic impact on financial markets.
"The markets went home on Friday expecting a deal would beimminent. While there's a heap of conciliatory language around,there's no deal yet," said Sam Tuck, currency strategist at ANZBank in Auckland.
"Now that we're in the week where the debt ceiling will behit, the yen's gaining on safe-haven bids."
The messy U.S. debt affair also dented the dollar againstthe safe haven Swiss franc and lent support to the euro.
The dollar slipped about 0.3 percent versus the Swiss francto 0.9100, while the euro inched up 0.1 percent to$1.3556.
The yen, whose vast liquidity makes it a relatively safeoption during times of uncertainty, also gained ground againstthe euro and the higher-yielding Australian dollar.
The euro slipped 0.2 percent to 133.22, while theAustralian dollar fell about 0.5 percent to 92.81 yen.
In the near term, the U.S. dollar could find modest supportagainst the yen as there is some buying interest at levels near98.00 yen, said Jeffrey Halley, FX trader for Saxo CapitalMarkets in Singapore.
"There are (dollar) bids into 98.00 at the moment," Halleysaid. He added that trading interest from Japanese players islikely to be light on Monday, with Tokyo's financial marketsclosed for a public holiday.
Halley added that the dollar could regain some groundagainst the yen during the session after the earlier selloff.
"These Monday morning knee-jerks normally get reversedduring the day, so I would expect dollar/yen to squeeze back to98.50/60 area this morning," he said.
The Australian dollar slipped 0.3 percent against the dollarto $0.9446, having fallen to $0.9410 earlier on Monday.
The Aussie was also further crimped in the wake of datashowing that exports from Australia's top trading partner Chinaunexpectedly dropped in September from a year earlier.
Data released on Saturday showed that China's export growthfizzled in September to post a surprise fall as sales toSoutheast Asia tumbled, a disappointing break to a recent run ofindicators that had signalled its economy gaining strength.