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Tokyo - The yen jumped in Asia Monday as a budget impasse in Washington threatens to bring the US government to a halt, while the euro was weighed by political tensions in Italy.
The dollar weakened to 97.87 yen in Tokyo, from 98.24 yen in New York Friday afternoon, while the euro slipped to 132.08 yen from 132.88 yen.
The European single currency also slipped to $1.3495 from $1.3519.
The US government is on the brink of shutting down after the House of Representatives approved a Republican bill seeking to delay President Barack Obama's health care law.
But Obama has threatened to veto any bill that undercuts his sweeping health overhaul and with with no agreement likely before a deadline of midnight Monday the government is close to first shutdown in 17 years.
"Markets are bracing for the worst, with risk aversion rising, US equities and the US dollar falling," Credit Agricole said.
But it added that "it's not just in the US where politics is fuelling market tensions".
In Italy, Prime Minister Enrico Letta is battling to save his coalition from collapse after Silvio Berlusconi said he was pulling his party's ministers out of the cabinet.
"As if the parlous state of the US government wasn't bad enough, the Italian government coalition has crumbled," National Australia Bank said.
Efforts to form a coalition government in Germany continue after Chancellor Angela Merkel's election victory last weekend.
Investors are also watching a European Central Bank meeting this week with the euro down from multi-month highs as ECB officials voice concern about liquidity in the European banking system.
