* Higher U.S. yields provide some support to greenback
* 10-year U.S. Treasury yields at highest since March
* Yen still underpinned by BOJ’s bond buying reduction
By Lisa Twaronite
TOKYO, Jan 10 (Reuters) - The dollar extended losses against the yen on Wednesday after the Bank of Japan’s move to trim Japanese government bond (JGB) purchases in the previous session triggered speculation that it could begin tapering its massive, ultra-easy monetary stimulus.
Despite some support from higher U.S. yields, the dollar slipped 0.3 percent to 112.31 yen, struggling in the wake of a 0.5 percent drop on Tuesday when Japan’s central bank slightly reduced the amount of its JGB purchases in its regular buying operations.
While the move was a technical tweak in line with the central bank’s policies to date, it unleashed a wave of speculation that the BOJ could be poised to begin winding down its stimulus.
The dollar earlier slipped as low as 112.17 yen, its lowest since Jan. 2.
“One would think that with U.S. yields at such high levels, the dollar would be stronger, but investors are adjusting positions, awaiting new factors,” said Kumiko Ishikawa, FX analyst at Sony Financial Holdings in Tokyo.
Yields on the 10-year U.S. Treasury note reached a 10-month highs, partly lifted by the BOJ’s action.
The 10-year note yield stood at 2.553 percent in Asian trading, up from its U.S. close of 2.546 percent on Tuesday. It earlier matched the overnight high of 2.555 percent, its highest since March.
“The BOJ’s move reminded traders of the fact that major central banks are willing to normalize their monetary policy,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.
“I think this unwanted strengthening of the yen will make the BOJ more cautious in going forward, when they want to move toward normalization,” he said.
The dollar index, which tracks the greenback against a basket of six major rival currencies, inched down 0.1 percent to 92.473.
The euro was steady on the day at $1.1937, well below its nearly four-month high of $1.2089 set last Thursday.
Sterling was slightly lower at $1.3534, but remained supported by expectations that Brexit talks will have a positive outcome.
Reporting by Lisa Twaronite; editing by Simon Cameron-Moore