* 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 edged up in early Asian trade on Wednesday, bolstered by higher U.S. Treasury yields but still constrained against the yen after the Bank of Japan’s move to trim its purchases of Japanese government bonds triggered tapering fears.
The dollar index, which tracks the greenback against a basket of six major rival currencies, inched up slightly to 92.536, not far from its overnight high of 92.640.
The euro was slightly lower on the day at $1.1933, well below its nearly four-month high of $1.2089 set last Thursday.
Against the yen, the dollar was slightly lower at 112.62 , struggling to make headway in the wake of a 0.5 percent drop in the previous session when Japan’s central bank slightly reduced the amount of its Japanese government bond (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 unwind its massive, ultra-easy monetary stimulus.
Yields on the 10-year U.S. Treasury note reached a 10-month high on Tuesday, partly lifted by the BOJ’s action.
The 10-year note yield stood at 2.551 percent in Asian trading, up from its U.S. close of 2.546 percent on Tuesday, when it rose as high as 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.
Sterling was slightly lower at $1.3535, but remained supported by expectations that Brexit talks will have a positive outcome.
Reporting by Lisa Twaronite; editing by Richard Pullin