Forex - Dollar falls to 1-month low versus yen

The dollar fell to a one-month low against the yen on Monday as the risk of a looming U.S. government shutdown bolstered investor demand for the safe haven yen.

USD/JPY hit 97.69 during late Asian trade, the lowest since August 29; the pair subsequently consolidated at 97.85, shedding 0.39%.

The pair was likely to find support at 96.97, the low of August 27 and resistance at 99.03, Friday’s high.

Political wrangling in Washington over funding for President Barack Obama’s healthcare law continued over the weekend, fuelling fears over the prospect for a U.S. government shutdown 

Congress must pass a short-term budget by midnight on Monday in order to keep the government open.

Republican opposition to the funding of the Affordable Care Act has created a standoff with the White House and the Democratic-controlled Senate, which have both said they will not support any budget bill that defunds or amends Obamacare.

Market sentiment was also hit after data released on Monday showed that China’s HSBC manufacturing index was revised down to 50.2 from an initial reading of 51.2 this month, indicating that the recovery in the world’s second largest economy remains fragile. 

Economists had expected an unchanged reading.

Elsewhere, the euro fell to two-week lows against the yen, with EUR/JPYdown 0.65% to 131.96, as concerns over fresh political instability in Italy weighed.

Silvio Berlusconi announced Saturday that he was pulling his ministers out of Prime Minister Enrico Letta’s coalition government and called for fresh elections to be held.