Asian shares, dollar, oil dip as US shutdown drags on

Democrats and Republicans remained far apart on ending govt shutdown, let alone reaching a deal on US borrowing limit

Asian shares, oil prices and the dollar came under pressure on Monday as politicians in Washington showed no signs of making progress to resolve the US budget standoff, while safe-haven gold inched higher.

Democrats and Republicans remained far apart on ending the government shutdown, let alone reaching a deal on the US borrowing limit by October 17 to avoid an unprecedented default.

Republican House Speaker John Boehner vowed not to raise the 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 US Standard & Poor's 500 e-mini futures shed 0.7% in Asian trade on Monday, pointing to further weakness on Wall Street later in the day. The S&P 500 index ended down 0.1% last week.

US Treasury futures rose 5-1/2 ticks.

Selling of riskier assets has been orderly so far, but investors expect volatility to increase if the shutdown continues as the Oct 17 deadline gets closer.

"As the days tick by and the US government's cash gradually starts to run out, the stakes will rise considerably," analysts at ANZ said in a note.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5%, and its 12-month forward price-to-earnings ratio stood at 11.8, below a 10-year average of 12.4, according to Thomson Reuters Datastream.

Japan's Nikkei share average dropped 1.1%, extending last week's 5% tumble - it biggest weekly fall since early August.

NERVE TESTING TIME AHEAD

"A higher risk of a US sovereign default would lead to a flight to liquidity and, ironically, a stronger US dollar, except against the most liquid/safest-haven 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 0.4% to 97.05 yen, giving up its gains on Friday to snap a five-day losing run against the Japanese currency.

The greenback was down 0.1% against the euro at $1.3572. Against a basket of major currencies, the dollar eased 0.1% to be within striking distance of an eight-month trough hit last week.

Brent crude eased 0.3% to around $109.10 a barrel, after gaining 0.8% last week to end a three-week losing run.

Gold, a safe-haven investment, inched up 0.1% to about $1,311.7 an ounce.