imageHONG KONG: Asian markets slumped on Monday as the US government edges towards a shutdown owing to a budget deadlock.

The face-off in Washington also sent the dollar tumbling, while the euro suffered selling pressure from a crisis in Italy that has left the country's five-month-old government on the brink of collapse.

Tokyo fell 1.72 percent by the break, Hong Kong was off 1.18 percent, Sydney shed 1.17 percent and Seoul was off 0.68 percent but Shanghai gained 0.56 percent.

Traders have been spooked by the latest row on Capitol Hill, with the US government 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.

Lawmakers now have less than 48 hours to reach an agreement to keep the government open, but analysts say the chances of a breakthrough are slim.

Obama has threatened to veto any bill that undercuts his sweeping health overhaul, while Democratic Senate Majority Leader Harry Reid says his chamber, which must approve the measure for it to pass, will reject the bill.

Adding to the crisis is a deadline to raise the country's borrowing limit, which comes up in mid-October. With Republicans determined not to hike the debt ceiling unless Obama makes way on the health bill, there are fears that Washington will run out of cash and default on its repayments.

The impasse weighed on the dollar Monday, with the unit weakening to 97.74 yen from 98.24 yen in New York Friday.

The euro fell to $1.3495 and 131.90 yen compared with $1.3519 and 132.88 yen.

The single currency saw selling pressure after Italian Prime Minister Enrico Letta called a vote of confidence in his left-right government as former premier Silvio Berlusconi pulled his party's ministers out of the five-month-old coalition.

Berlusconi, facing removal from the Senate because of a conviction for tax fraud, spurred the MPs to resign on Saturday.

President Giorgio Napolitano will have to mediate to find a way out of the latest political impasse, and has said he would dissolve parliament, triggering new elections, only "if there are no other solutions".

On oil markets New York's main contract, West Texas Intermediate for delivery in November was down $1.26 to $101.61, while Brent North Sea crude for November eased 92 cents to $107.71.

Gold cost $1,340.14 at 0220 GMT compared with $1,324.60 on Friday.

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