* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
By Daniel Leussink
TOKYO, Oct 1 (Reuters) - The dollar dipped against the Canadian dollar on Monday ahead of a looming deadline in Canada-U.S. talks over reworking the North American Free Trade Agreement, while hitting a more than 10-month high against the yen.
Canadian and U.S. negotiators were racing against a midnight Sunday deadline (0400 GMT Monday) to reach a deal to revamp NAFTA, but had not yet settled issues such as American tariffs and access to Canada's dairy market, an official and sources said. President Donald Trump's administration has said Canada must sign on to the text of the updated North American Free Trade Agreement before Monday local time or face exclusion from the pact. Washington has already reached a side deal with Mexico, the third NAFTA member.
"Even Trump does not want to break this deal, so there is room for compromise from the U.S. side," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.
"If there is no deal with Canada at the end of September, I don't think it's the end of the world."
The Canadian dollar CAD=D4 rose to a four-month high of $1.2837 before giving up some gains. It last traded about 0.4 percent higher at $1.2852.
The loonie added to the previous session's gains of more than one percent.
Canada's ambassador to Washington, David MacNaughton, told reporters that both sides had made lots of progress, but were not there yet, saying: "we still have a couple of tough issues, so we're doing our best."
One Ottawa source directly familiar with the talks said the two sides were very close, while another said they were close, but added they were not there yet.
"The removal of the uncertainty of the NAFTA deal is a good thing, but it will not last long," Mizuho's Yamamoto said.
The yen JPY= weakened to 113.85 per dollar, reaching its lowest since the middle of November last year before giving up some gains.
The greenback has risen four straight weeks against the Japanese currency, including a nearly one percent gain booked last week.
The yen last traded 0.05 percent higher at 113.77 yen.
The dollar index .DXY , which measures the greenback against a basket of six currencies, was nearly flat at 95.137, not far off a more than two-week high of 95.366 reached on Friday.
For the third quarter, which ended Friday, the dollar index posted its second consecutive quarterly gain, rising more than half a percent.
The euro EUR= traded flat with worries about a rise in Italy's deficit weighing on the single currency after the Italian government agreed to set a higher than expected budget deficit target. euro last changed hands at $1.1610, not far off a more than two-week low of $1.1569 touched on Friday.
It gave up nearly 1.2 percent last week.
(Editing by Kim Coghill)