The dollar rose in Asia on Tuesday, with investors focused on a budget standoff in Washington that could shut down the federal government in a matter of hours.
The greenback bought 98.62 yen in Tokyo morning trade, from 98.21 yen on Monday in New York, where it had earlier fallen to a seven-week low of 97.50 yen.
The euro has come under pressure owing to a political row in Italy that threatens the future of the country's young government. The single currency fetched $1.3520 and 133.35 yen compared with $1.3524 and 132.81.
Late Monday, the US Senate killed the latest House measure to delay President Barack Obama's health care law as part of a federal funding bill.
With less than two hours before a midnight deadline, Republicans and Democrats refuse to shift positions over a new budget that if not agreed will mean the first government closure in 17 years.
Obama has warned that the stand-off threatens to dent a budding recovery in the world's largest economy.
“Neither side looks willing to budge at this late hour,” National Australia Bank said.
The Bank of Japan said its quarterly Tankan survey of business sentiment hit a five-year high, likely clearing the way for Prime Minister Shinzo Abe to hike the nation's sales taxes - seen as crucial to chopping a mammoth national debt.
The tax rise is widely expected “but any surprises overturning expectations could weigh on the yen”, Kengo Suzuki, forex strategist at Mizuho Securities, told Dow Jones Newswires.
In Italy, Prime Minister Enrico Letta is battling to save his coalition from collapse after former premier Silvio Berlusconi said he was pulling his party's ministers out of the cabinet. Letta is due to go to parliament on Wednesday for a confidence vote in his government, which was formed barely five months ago. - Sapa-AFP