FOREX-Dollar extends rise on report of Summers as next Fed chief
* Nikkei says Obama set to name Summers as next Fed chief
* Announcement expected early as late next week - Nikkei
* Dollar and U.S. bond yields rise after the report
* All eyes on Fed meeting next week
SINGAPORE, Sept 13 (Reuters) - The dollar rose broadly on Friday, extending its gains after a Japanese newspaper report said U.S. President Barack Obama was set to name former Treasury Secretary Lawrence Summers as the next chairman of the Federal Reserve.
Japanese business daily Nikkei, citing sources, reported that the White House was expected to announce the decision as early as next week, after the Fed's Sept. 17-18 policy meeting.
Summers, who served as treasury secretary during the Clinton administration, and Fed Vice Chair Janet Yellen, are considered the top two candidates to replace current Chairman Ben Bernanke, whose term expires at the end of January.
Of the two, market players regard Summers as being less dovish on monetary policy compared with Yellen.
If nominated, Summers would likely face stiff opposition from Republicans and some Democrats.
Traders said the Nikkei report helped give an added lift to U.S. Treasury yields and the dollar, both of which had already been edging higher on the day even before the Nikkei story reached the market.
"You have to wonder just how credible it is. I mean it would be understandable if the New York Times or the Wall Street Journal were reporting this," said a trader for a Japanese bank in Singapore.
"But the market seems to be showing some reaction to this," the trader added.
Reports in the New York Times and Washington Post had recently suggested Obama was strongly inclined to pick Summers.
The dollar index, which measures the greenback's value versus a basket of currencies, was last up 0.2 percent on the day at 81.684, edging away from a two-week low of 81.356 set on Thursday.
The dollar touched an intraday high versus the yen in the wake of the Nikkei report, rising to as high as 99.98 yen. It later pared some of its gains, and the dollar was last up 0.3 percent at about 99.83 yen.
Treasury yields also edged higher, with the 10-year Treasury yield last at about 2.940 percent, up from Thursday's U.S. close of 2.905 percent.
Earlier, some market players cited the Japanese government's upgrade of its economic assessment in September as a supportive factor for the dollar versus the yen.
The government raised its view on the economy for the seventh time this year because of rising capital expenditure, in another sign Prime Minister Shinzo Abe's reflationary policies are boosting growth.
"It seems a step away from deflation. In my view, anything that seems to edge away from deflation pressures is more negative for the yen," said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole in Hong Kong.
The euro slipped against a broadly firmer dollar, with the single currency easing 0.2 percent to $1.3272.
The dollar's gains came ahead of the Federal Reserve's policy meeting next week, with the focus on whether the Fed will begin to scale back stimulus and by how much.
Following last Friday's uninspiring U.S. non-farm payrolls data, markets are less worried about the risk of any major pullback from the Fed.
Indeed, many traders and analysts expect the Fed to reduce its $85 billion monthly bond-buying programme by a modest $10 billion.
A much larger number would be seen as hawkish and undoubtedly provide a boost to the dollar, while any delay in tapering will be interpreted as dovish, traders said.