* Dollar steady vs yen, trades near 3-month highs
* Reports of support for John Taylor as Fed chief
* Aussie dollar sags after lower-than expected Australia CPI (Updates prices, adds comments)
By Masayuki Kitano
SINGAPORE, Oct 25 (Reuters) - The dollar held near a three-month high versus the yen on Wednesday, underpinned by reports of Republican senators’ favouring John Taylor to become the next head of the Federal Reserve, while the Aussie dollar weakened after soft inflation data.
Taylor, a Stanford University economist, is seen as someone who may put the Fed on a path of faster interest rate increases compared to current Fed chair Janet Yellen, whose term expires next February.
The dollar last traded at 113.77 yen, down 0.1 percent on the day, but still within sight of Monday’s peak of 114.10 yen, which was the dollar’s highest since July 11.
“The market has started to price in a more hawkish Fed chair,” said Roy Teo, investment strategist for LGT Bank in Singapore.
U.S. President Donald Trump used a luncheon with Senate Republicans on Tuesday to get their views on who he should pick to head the Federal Reserve, according to senators who attended.
A source familiar with the matter said Trump polled the Republicans on whether they would prefer Taylor or current Fed Governor Jerome Powell for the job.
More senators preferred Taylor over Powell, the source said. Trump also said he was considering reappointing Yellen, the source said.
The reports of support for Taylor as the next Fed chief, helped offset news of Republican infighting, which might hamper the passage of a tax cut plan.
Two Republican senators accused Trump of debasing U.S. politics and the country’s standing abroad, a rebellion that could portend trouble for his legislative agenda.
The Australian dollar tumbled to three-month lows after Australia’s September-quarter consumer price index figures came in below market expectations, making investors see less chance of increases in Australian interest rates in coming months.
The Australian dollar was last down 0.7 percent on the day at $0.7720, having touched a low of $0.7716 at one point, its weakest level since mid-July.
Possible support for the Australian dollar lies at its 200-day moving average at $0.7694, and a breach of that level could open the way for a test of levels around $0.7600, said Teppei Ino, an analyst for Bank of Tokyo-Mitsubishi UFJ in Singapore.
The euro held steady at $1.1763, with the near term focus on Thursday’s European Central Bank policy meeting.
According to a Reuters poll of economists, the ECB is expected to announce on Oct. 26 that it will start trimming its monthly asset purchases to 40 billion euros from 60 billion euros in January.
The economists were split on how long the ECB will prolong the programme beyond December when the current one expires and there was no clear view on whether or not it would leave the programme open-ended. (Reporting by Masayuki Kitano; Additional reporting by Wayne Cole in Sydney; Editing by Simon Cameron-Moore)