  We present photometric and spectroscopic data for the second microlensing
event seen toward the Small Magellanic Cloud (SMC), MACHO-98-SMC-1. The lens is
a binary. We resolve the caustic crossing and find that the source took 2 Delta
t = 8.5 hours to transit the caustic. We measure the source temperature
T_eff=8000 K both spectroscopically and from the color (V-I)_0~0.22. We find
two acceptable binary-lens models. In the first, the source crosses the caustic
at phi=43.2 deg and the unmagnified source magnitude is I_s=22.15. The angle
implies that the lens crosses the source radius in time t_* = Delta t sin phi =
2.92 hours. The magnitude (together with the temperature) implies that the
angular radius of the source is theta_* = 0.089 micro-arsec. Hence, the proper
motion is mu=theta_*/t_*=1.26 km/s/kpc.
  For the second solution, the corresponding parameters are phi=30.6 deg,
I_s=21.81, t_*=2.15 hours, theta_* = 0.104 micro-asrsec, mu=2.00 km/s/kpc. Both
proper-motion estimates are slower than 99.5% of the proper motions expected
for halo lenses. Both are consistent with an ordinary binary lens moving at ~
75-120 km/s within the SMC itself. We conclude that the lens is most likely in
the SMC proper.
