The dollar slipped on Monday and the yen gained on safe-haven demand, as U.S. lawmakers struggled to reach a deal before this week's debt ceiling deadline, stoking concerns the United States may actually default on its debt obligations.
While negotiations in the U.S. Senate to bring the fiscal crisis to an end showed signs of progress on Sunday, failure to break the stalemate before Thursday, the deadline to raise the debt ceiling, would leave the world's biggest economy unable to pay its bills in the coming weeks.
In late trading, the dollar was down less than 0.1 percent against a basket of currencies at 80.32.
The dollar slipped slightly versus the yen to 98.56 yen, having touched a low of about 98.05 yen earlier. The dollar hit a near two-week high of 98.60 yen set on Friday.
The yen's liquidity makes it a relatively safe option during times of uncertainty. Traders said bids for the U.S. dollar at levels near 98.00 yen helped to limit the yen's rise.
The dollar was down 0.2 percent against the Swiss franc at 0.9101 franc, while the euro was up 0.2 percent at $1.3561.
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