* Dollar/yen shakes off losses as equities rebound
* Underlying optimism for US tax reform support dollar
* Canadian dollar nurses wounds after dovish-sounding BoC
* Bitcoin briefly tops record $14,000
TOKYO, Dec 7 (Reuters) - The dollar edged up against its peers on Thursday, shaking off earlier losses versus the yen, supported by signs that investors' risk appetite was improving again and optimism on U.S. tax reforms.
The greenback was 0.1 percent higher at 112.370 yen after dropping by 0.25 percent overnight.
The dollar had slipped against the yen after President Donald Trump on Wednesday recognised Jerusalem as the capital of Israel, imperilling Middle East peace efforts and upsetting Washington's friends and foes alike.
"The impact of the 'risk off' moves that weakened the dollar against the yen stemming from the Middle East developments appears to have been limited. It likely served as a pretext for speculators to cover some yen shorts," said Yukio Ishizuki, senior currency strategist at Daiwa Securities in Tokyo.
"We could still see participants try to sell the dollar on upcoming 'risk off' events. But the dollar is positioned to absorb much of the selling pressure, with many players poised to buy on dips."
Dollar/yen on Thursday rose in line with a surge in Tokyo shares, which had slumped the previous day on Middle East concerns.
The U.S. currency rose to a two-week high against a basket of six major currencies as optimism towards U.S. lawmakers' making progress on the tax legislation continued to grow. Upbeat U.S. private-sector employment data released on Wednesday also provided support.
U.S. Senate Republicans agreed to talks with the House of Representatives on sweeping tax legislation on Wednesday, amid early signs that lawmakers could bridge their differences and agree on a final bill ahead of a self-imposed Dec. 22 deadline.
The dollar index was little changed at 93.556 after rising to 93.650 overnight, its highest since Nov. 22.
The euro was steady at $1.1800 after slipping 0.25 percent overnight, when it hit a two-week low of $1.1780.
Bitcoin briefly soared nearly 3 percent to a new record high of $14,047.40, continuing its surge from below $1,000 at the beginning of the year, despite questions about the cryptocurrency's real value and worries about a dangerous bubble.
Bitcoin was last up nearly 2 percent at $13,890 at the Luxembourg-based Bitstamp exchange.
The Canadian dollar nursed deep losses suffered overnight after the Bank of Canada held interest rates steady and showed enough caution to dampen expectations for a hike early next year.
The loonie was effectively flat at C$0.9902 per dollar after retreating 0.8 percent the previous day.
The Australian dollar, hit the previous day by weaker than expected local gross domestic product numbers, extended losses against the buoyant dollar.
The Aussie was 0.2 percent lower at $0.7545.
The New Zealand dollar fared better after data showed that housing prices in the country jumped 6.4 percent in November.
The kiwi was steady at $0.6879. (Reporting by Shinichi Saoshiro; Editing by Kim Coghill)