The euro advanced to $1.3227 in early Asian trade from $1.3217 in late US trade Friday. The dollar also lost ground against the yen, slipping to 85.88 yen from 85.98 yen.

The euro bought 113.57 yen from 113.62 yen.

Traders were pessimistic a deal could be reached to avoid the fiscal cliff of tax hikes and spending cuts before a January 1 deadline, with negotiations appearing deadlocked, said Yang Weiming, premium client manager for IG Markets Singapore.

"Previously there was greater optimism on the fiscal cliff, now their expectations have been lowered," he told AFP.

Analysts fear that if a deal is not reached to prevent the US going over the fiscal cliff, the American economy could be tipped into recession.

Despite overnight negotiations, US Democrats and Republicans said little progress appeared to have been made.

Senate Republican minority leader Mitch McConnell warned that negotiators were still a long way from success, with Democrats not responding to a "good faith offer" his party had made.

Senate Democratic leader Harry Reid agreed talks were at a standstill.