* Dlr/yen reaches 10-day high as McCain endorses Senate tax bill
* Euro, pound hold ground vs dollar on easing of political woes
* Kiwi steadies after fall, Aussie struggles
By Shinichi Saoshiro
TOKYO, Dec 1 (Reuters) - The dollar rose to a 10-day high against the yen on Friday as U.S. tax reform plans were seen making further progress towards legislative approval.
The greenback sagged against the euro and pound, however, with these currencies drawing support from perceived easing of political tensions in Europe.
The U.S. currency extended overnight gains and was last 0.05 percent higher at 112.590 yen after touching 112.690, its highest since Nov. 21. It was on track to gain 1 percent on the week.
The dollar was boosted overnight as long-term U.S. Treasury yields spiked to five-week highs on news that U.S. Senator John McCain had endorsed the Senate tax bill, potentially easing challenges to its congressional passage.
The euro stood little changed at $1.1898 after gaining about 0.5 percent the previous day. The common currency, which reached a two-month top of $1.1961 on Monday, was still on track for a 0.3 percent weekly loss after a volatile week.
The pound was a shade higher at $1.3533 after surging 0.9 percent overnight when it set a two-month high of $1.3549.
“Hopes in the euro zone appear strong that ongoing talks in Germany would lead to a coalition government, while in Britain there is growing optimism towards a Brexit negotiations progressing,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.
“Short-term investor pessimism towards the euro zone and Britain is receding, supporting the euro and pound against the dollar. But dollar/yen maintains a high correlation with U.S. yields, which explains the latest rise by the pair.”
German Chancellor Angela Merkel’s conservatives held talks late on Thursday with centre-left Social Democrats (SPD) to facilitate the formation of a stable government in a bid to end the country’s political impasse. The details of the talks were yet to be revealed as of early Friday.
The New Zealand dollar stood little changed at $0.6830 after data showed the country’s terms of trade hit a record high in the third quarter.
The kiwi had sunk 0.7 percent the previous day, hurt by a weak business sentiment reading and lacklustre housing data.
The Australian dollar was 0.05 percent lower at $0.7559 , headed for its sixth straight session of losses. A move below $0.7532 would take the currency to its lowest since June.
The Aussie has struggled against the buoyant dollar, which has benefited this week from a significant rise in Treasury yields and upbeat economic indicators. (Reporting by Shinichi Saoshiro; Editing by Sam Holmes)