* Two-year U.S. yields hold near nine-year highs
* Selling dollar has been consensus trade for the year
* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh
LONDON, Oct 18 (Reuters) - The dollar climbed for a fifth consecutive day on Wednesday as higher U.S. Treasury yields triggered a squeeze on investors who have been broadly bearish on the greenback in recent weeks.
Some positive dollar news this week in the form of a potential new hawkish U.S. Federal Reserve chair and the slow progress of U.S. tax reforms has also helped the dollar rise to a one-week high in the previous session.
"There is a nervousness squeeze on USD shorts underway related to Fed chair uncertainty, so medium-term USD sellers are being forced to stand aside," said Stephen Gallo, European head of FX strategy at BMO financial group.
The dollar index rose 0.2 percent to 93.70, extending a rebound from Friday's 2 1/2-week low of 92.749. Including Wednesday, it has risen for five consecutive sessions.
U.S. Senate Republicans on Monday gained crucial support for a vote on a budget resolution that is vital to President Donald Trump's hopes of signing tax reform legislation into law before January.
"The overnight news of progress in negotiations over the new U.S. tax plan seems to be dollar-positive but we have to see some strong economic data before the dollar breaks higher," said Jane Foley, senior FX strategist at Rabobank.
Investors will also focus on U.S. Beige Book data later in the day, with some likely to be wary of buying dollars aggressively after disappointing U.S. inflation data.
With the Federal Reserve expected to raise interest rates for the third time this year in December, markets are looking to who will replace Janet Yellen as chair when her term expires in February.
Selling the dollar has been a consensus favorite trade, especially against the euro this year in currency markets as investors have focused on the diverging economic fortunes between the world's two major developed economies.
Two-year U.S. Treasury yields were holding near a nine-year high of 1.56 percent, creating a squeeze on bearish bets against the dollar which have remained near record highs.
The dollar's gains have deepened losses on the euro, which has broken below the $1.1750 line.
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(Reporting by Fanny Potkin and Saikat Chatterjee; Editing by Gareth Jones)