* Dollar hit by report Powell favoured to succeed Yellen
* Markets have largely priced in Fed rate hike in December
* Euro firms but still dogged by concerns over Catalonia
TOKYO, Oct 4 (Reuters) - The dollar stepped back from a 1-1/2-month high against a basket of currencies on Wednesday on speculation that U.S. President Donald Trump's choice for the next Fed chair could be a less hawkish candidate than some had expected.
U.S. Treasury Secretary Steven Mnuchin favours Fed Governor Jerome Powell over former governor Kevin Warsh, Politico reported. Both Warsh and Powell were interviewed at the White House last week.
While both are seen as serious candidates to replace current Chair Janet Yellen when her term expires in February next year, Powell is seen as more dovish than Warsh, who has criticised the Fed's bond-buying programme in the past.
The dollar had rallied earlier this week on speculation that Warsh might be the leading candidate to replace Yellen, and got an extra boost from strong U.S. data.
A more hawkish Fed candidate would likely prompt investors to bet on more aggressive normalization of monetary policy, to the dollar's benefit.
"The next head of the Fed is a longer-term focus for the forex markets," said Keiko Ninomiya, senior FX market analyst at SMBC Trust Bank in Tokyo. "In the shorter term, investors are wary ahead of U.S. employment data later this week," she said.
The dollar index, which tracks the greenback against a basket of six major rivals, slipped 0.2 percent to 93.433 , off a six-week high of 93.92 touched on Tuesday following strong U.S. manufacturing figures.
"The dollar has gained recently on expectations of a Fed rate hike in December and hopes of tax cuts, but the markets have finished pricing in all the positive news," said Shinichiro Kadota, senior rates and FX strategist at Barclays.
"A December rate hike is already factored in while we have to see whether any tax deal will come through," he added.
Dollar money market futures were pricing in about a 70 percent chance of a rate hike by December.
The euro traded at $1.1764, up 0.2 percent on the day and off Tuesday's 1 1/2-month low of $1.16955.
The common currency has been also dogged by concerns over political and social turmoil in Catalonia.
Spain's King Felipe VI on Tuesday accused Catalan secessionist leaders of shattering democratic principles and dividing Catalan society while Catalonia's leader, Carles Puigdemont, said the region will declare independence in a matter of days.
The dollar's rally against the yen has also stalled, with the U.S. currency unable to clear resistance around 113.25 yen in the past week. The dollar dipped 0.2 percent to 112.64 yen .
Uncertainties ahead of Japan's general election on Oct. 22, where Prime Minister Shinzo Abe faces a challenge from a new party formed by a popular Tokyo Governor Yuriko Koike, also clouded the outlook for the currency pair.
The British pound edged 0.2 percent higher to $1.3259, but was still down 1.0 percent so far this week.
It dropped to $1.3222 overnight, its lowest in almost three weeks, after data showing a surprise contraction in the construction sector stoked worries about economic uncertainty surrounding Britain's exit from the European Union.
Adding to a sense of uncertainty, Brexit minister David Davis said on Tuesday that Britain is ready to walk away with no deal, and that officials were "contingency planning" to make sure all scenarios were covered.
The Australian dollar bounced back slightly from Tuesday's three-month low after the central bank cautioned that a higher currency would drag on the economy and inflation.
The Aussie fetched $0.7856, up 0.2 percent on the day and off Tuesday's low of $0.7785. (Additional reporting by Lisa Twaronite; Editing by Eric Meijer and Kim Coghill)