By Lisa Twaronite
TOKYO (Reuters) - Asian shares trod water in early trade on Wednesday, while U.S. Treasury yields and the dollar got a lift following a report Republican senators were leaning towards John Taylor to be the next Federal Reserve chief.
MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> was flat in early trade.
Japan's Nikkei stock index <.N225> was up 0.5 percent in early trading, on track for an unprecedented 17th straight session of gains after the victory of Prime Minister Shinzo Abe's coalition in Sunday's election raised investors' hopes of continued yen-weakening stimulus.
U.S. President Donald Trump used a luncheon with Senate Republicans on Tuesday to get their views on who he should tap to be the next leader of the Federal Reserve, according to senators who attended.
A source familiar with the matter said Trump polled the Republicans on whether they would prefer Stanford University economist John Taylor or current Fed Governor Jerome Powell for the job, and more senators preferred Taylor.
Taylor is seen as someone who may put the central bank on a faster path of interest rate increases.
That gave stocks a lift, and helped send U.S. benchmark 10-year Treasury note yields to their highest since March. The 10-year yield stood at 2.417 percent > in Asian trade, up from its U.S. close of 2.406 percent on Tuesday, when it rose as high as 2.428 percent.
"The U.S. 10-year Treasury yield is heading higher, so that is supporting the dollar in general," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.
The dollar was briefly dented on Tuesday by a CNBC report, citing an aide of Senate leader Mitch McConnell, that three GOP Senators may not back the Republican tax bill.
"The base line is that a U.S. tax cut will eventually materialise, and that's supporting the dollar and pushing up the U.S. Treasury yields," Yamamoto said.
The Australian dollar skidded 0.5 percent to $0.7741 >, after weak consumer price figures prompted investors to pare expectations of further tightening from the Reserve Bank of Australia.
On Wall Street on Tuesday, stronger-than-expected results and forecasts from companies including 3M and Caterpillar also fuelled optimism about economic strength, with the Dow Jones Industrial Average <.DJI> closing at a record high. [.N]
European shares closed mixed on Tuesday ahead of Thursday's European Central Bank meeting at which policymakers are expected to signal they will take small steps away from their ultra-easy monetary stimulus.
The euro was slightly lower on the day at $1.1757 >, while the dollar index, which tracks the greenback against a basket of six major rivals, was up 0.2 percent at 93.971 <.DXY>.
The dollar was steady at 113.92 yen >, though a bit shy of a three-month high of 114.10 yen touched on Monday.
Crude oil futures caught their breath after rising more than 1 percent overnight after top exporter Saudi Arabia said it was determined to end a supply glut. Prices also drew support from forecasts of a further drop in U.S. crude inventories as well as nervousness over tensions in Iraqi Kurdistan. [O/R]
Brent crude
(Reporting by Lisa Twaronite; Editing by Sam Holmes)
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