By Dominic Lau
TOKYO, Oct 7 (Reuters) - Asian markets look set for acautious start to the week on Monday, with U.S. stock futuresand the dollar coming under pressure as politicians inWashington showed no signs of making progress over the weekendin resolving the U.S. budget standoff.
Democrats and Republicans remained far apart in ending thefirst government shutdown in 17 years, let alone reaching a dealon the U.S. borrowing limit by Oct. 17 to avoid an unprecedenteddebt default.
Republican House Speaker John Boehner vowed on Sunday not toraise the U.S. debt ceiling without a "serious conversation"about what is driving the debt, while Democrats said it wasirresponsible and reckless to raise the possibility of adefault.
The comments appeared to mark a hardening stance since latelast week when Boehner was reported to have told Republicansprivately that he would work to avoid default, even if it meantrelying on the votes of Democrats, as he did in August 2011.
The U.S. Standard & Poor's 500 e-mini futures shed0.5 percent in early Asian trade on Monday. The S&P 500 index 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, butinvestors see volatility rising if the shutdown continues as theOct 17 deadline gets closer.
"As the days tick by and the U.S. government's cashgradually 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 afterJapan's Nikkei share average tumbled 5 percent last weekto mark its worst weekly decline since early August.
Australia's S&P/ASX 200 index was flat in atentative start to the session.
"A higher risk of a U.S. sovereign default would lead to aflight to liquidity and, ironically, a stronger U.S. dollar,except against the most liquid/safest-haven ones: euro, yen,sterling and Swiss franc," analysts at Barclays Capitals wrotein a note.
"That is not to say we expect a breach of the ceiling, andcontinue to expect that a resolution will be found, despite thebrinkmanship."
The dollar slipped 0.3 percent to 97.18 yen, givingup its gains on Friday to snap a five-day losing run against theJapanese currency.
The greenback was down 0.1 percent against the euro at $1.3571. Against a basket of major currencies, the dollar eased 0.1 percent, within striking distance of aneight-month trough hit last week.
Safe-haven gold inched up 0.3 percent to about $1,314an ounce.
Brent crude eased 0.3 percent to around $109.10 abarrel after gaining 0.8 percent last week to end a three-weeklosing run.
- government shutdown