Caution reins in Asia as U.S. shutdown drags on, dollar falls

Sun Oct 6, 2013 7:53pm EDT
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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.   Continued...

A visitor walks past logos at the Tokyo Stock Exchange in Tokyo June 13, 2013. REUTERS/Toru Hanai