The problem of Britain's land border with Ireland has thwarted a drive to clinch a Brexit deal, as negotiators over the weekend admitted defeat after marathon talks and pressed pause for the coming days.
The pound is also under pressure after former foreign minister Boris Johnson's comments in a newspaper column on Sunday that Britain must stand up to bullies in the European Union and press for a "super Canada" deal.
Johnson, a key figure of the campaign to leave the EU in 2016 and bookmakers' favourite to replace Prime Minister Theresa May, is the latest critic to redouble efforts to urge her to rethink her plan to leave the union.
"The primary focus for sterling is Brexit and data is only a distraction," Kathy Lien, New York-based managing director of foreign exchange strategy at BK Asset Management, said in a note.
"The clock is ticking and a deal is drawing close but having been burned by false hopes, investors are ignoring the conflicting headlines and waiting for official confirmation," she said
The yen strengthened to 112.07 versus the dollar on Monday. Against the dollar, the yen has strengthened in six out of the last seven trading sessions, as global risk-off sentiment kept active safe haven bids on the Japanese currency.
U.S. Treasury Secretary Steven Mnuchin said on Saturday that Washington wants to include a provision to deter currency manipulation in future trade deals, including with Japan, based on the currency chapter in the new deal to revamp the North American Free Trade Agreement (NAFTA).
His remark drew concern in Japan, where domestic media ran front-page stories questioning whether this would give Washington the right to label as currency manipulation any future foreign exchange market interventions by Tokyo to keep sharp yen rises in check.
Analysts expect the yen to strengthen in the short term as potential negative sentiment towards equities would catalyze safe-haven demand for the yen.
"Our bias is that equities will remain under pressure this week, and thus see scope for USD/JPY to ease somewhat further towards the 110 level," a research note from Mizuho Bank said.
At 0408 GMT Monday, Japan's Nikkei was down 1.5 percent to 22,352.
The Australian dollar changed hands at 0.7101 against the dollar, down 0.25 percent. The Aussie hit a two-year low of 0.7039 on Oct. 5.
The Canadian dollar traded flat versus the dollar on Monday, at 1.3025.
The Swiss franc, seen as a safe haven currency by traders, was little changed at 0.9908 versus the dollar.
Spot gold built on last week's gains, changing hands at $1,222 per ounce, gaining 0.38 percent. (Reporting by Vatsal Srivastava; Editing by Sam Holmes and Richard Borsuk)
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